Question

Assumptioms-

The company will most likely experirence a 50% growth rate.

The owners believed they would need to purchase state-of-the-art industrial sewing machines, cutting tables, and pressing machines at a cost of $280,000. The new equipment would be depreciated over 14 years, using straight-line depreciation.

1.Cash, accounts receivable, and inventory would follow their same relationships to sales as in the past two years; that is, each asset would maintain the average asset-to-sales percentages experienced in 2012 and 2013.

2. Both cost of goods sold and marketing expenses are variable and would approximate the same percentage of sales as in 2012 and 2013.

3. General and administrative costs are fixed in nature but should increase to $130,000 in the next year.

4. The interest rates on the already outstanding debt would be renegotiated, which would reduce the inter-est on this debt to $45,000.

5. The firm’s tax rate should be about 40 percent.

question -1. Given the assumptions that Jantz and Palmer have made, prepare a pro forma income statement for 2014. Assume that the line of credit provided by the bank will be needed for the full year. Use the prior years pro forma statements as examples.

2013 Balance Sheets for the Years Ending December 31, 2011, 2012, and 2013 (continued) 2011 2012 Debt (Liabilities) and Equity Accounts payable $ 128,000 $ 153,000 Short-term notes payable 250,000 275,000 Other current liabilities 46,000 50,000 Total current liabilities $ 424,000 $ 478,000 Long-term debt 300,000 250,000 Total debt $ 724,000 $ 728,000 Owner's capital $ 155,560 $ 155,560 Retained earnings 88,440 186,864 Total equity $ 244,000 $ 342,424 TOTAL DEBT AND EQUITY $ 968,000 $1,070,424 $ 135,000 275,000 51,152 $ 461.152 275,000 $ 736,152 $ 155,560 311,604 $ 467,164 $1,203,316

Answer 1

ashley palmer clothing inc
income statement for the year ended 2014
sales	7,050,000
cost of goods sold	5,710,500
gross profits	1,339,500
marketing expenses	415,950
general & admin expenses	130,000
depreciation expenses	45,000
operating profits	748,550
interest expense	45,000
profit before taxes	703,550
taxes @ 40%	281,420
net profit	422,130