A financial manager at General Talc Mines has gathered the financial data essential to prepare a pro forma balance sheet for cash and profit planning purposes for the coming year ended December 31, 2004. Using the percent-of-sales method and the following financial data, prepare the pro forma balance sheet in order to answer the following multiple choice questions.
(a) The firm estimates sales of $1,000,000.
(b) The firm maintains a cash balance of $25,000.
(c) Accounts receivable represents 15 percent of sales.
(d) Inventory represents 35 percent of sales.
(e) A new piece of mining equipment costing $150,000 will be purchased in 2004.
Total depreciation for 2004 will be $75,000.
(f) Accounts payable represents 10 percent of sales.
(g) There will be no change in notes payable, accruals, and common stock.
(h) The firm plans to retire a long term note of $100,000.
(i) Dividends of $45,000 will be paid in 2004.
(j) The firm predicts a 4 percent net profit margin.
Balance Sheet
General Talc Mines
December 31, 2003
Assets
Cash $ 25,000
Accounts receivable 120,000
Inventories 300,000
Total current assets $ 445,000
Net fixed assets $ 50 0,000
Total assets $ 945,000
Liabilities and stockholders'
equity accounts payable $ 80,000
Notes payable 350,000
Accruals 50,000
Total current liabilities $ 480,000
Long-term debts 150,000
Total liabilities $ 630,000
Stockholders' equity
Common stock 180,000
Retained earnings 135,000
Total Stockholders' equity $ 315,000
Total liabilities and stockholders' equity $ 945,000
1) The pro forma total current assets amount is (See Table 3.4)
A) $470,900.
B) $500,000.
C) $575,000.
D) $525,000.
2) The pro forma net fixed assets amount is (See Table 3.4)
A) $575,000.
B) $650,000.
C) $500,000.
D) $600,000.
3) The pro forma current liabilities amount is (See Table 3.4)
A) $400,000.
B) $500,000.
C) $475,000.
D) $450,000.
4) The pro forma total liabilities amount is (See Table 3.4)
A) $500,000.
B) $650,000.
C) $700,000.
D) $550,000.
5) The pro forma accumulated retained earnings amount is (See Table 3.4)
A) $140,000.
B) $90,000.
C) $175,000.
D) $130,000.
6) The external financing required in 2004 will be (See Table 3.4)
A) $240,000.
B) $230,000.
C) $200,000.
D) $195,000.
7) General Talc Mines may prepare to (Sec Table 3.4)
A) cancel the retirement of the long term note to cover the needed financing.
B) eliminate the dividend to cover the needed financing.
C) repurchase common stock equal to the external funds requirement.
D) arrange for a loan equal to the external funds requirement.
8) The external funds requirement results primarily from (See Table 3.4)
A) low profit margin.
B) the retirement of debt and purchase of new fixed assets.
C) the payment of dividends.
D) high cost of sales.
9) If General Talc Mines cannot raise the external financing required through traditional credit channels, the firm
may (See Table 3.4)
A) sell common stock.
B) purchase additional fixed assets to raise productivity.
C) factor accounts receivable.
D) increase sales.
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(a) The firm estimates sales of $1,000,000.
(b) The firm maintains a cash balance of $25,000.
(c) Accounts receivable represents 15 percent of sales.
(d) Inventory represents 35 percent of sales.
(e) A new piece of mining equipment costing $150,000 will be purchased in 2004.
Total depreciation for 2004 will be $75,000.
(f) Accounts payable represents 10 percent of sales.
(g) There will be no change in notes payable, accruals, and common stock.
(h) The firm plans to retire a long term note of $100,000.
(i) Dividends of $45,000 will be paid in 2004.
(j) The firm predicts a 4 percent net profit margin.
Balance Sheet
General Talc Mines
December 31, 2003
Assets
Cash $ 25,000
Accounts receivable 120,000
Inventories 300,000
Total current assets $ 445,000
Net fixed assets $ 50 0,000
Total assets $ 945,000
Liabilities and stockholders'
equity accounts payable $ 80,000
Notes payable 350,000
Accruals 50,000
Total current liabilities $ 480,000
Long-term debts 150,000
Total liabilities $ 630,000
Stockholders' equity
Common stock 180,000
Retained earnings 135,000
Total Stockholders' equity $ 315,000
Total liabilities and stockholders' equity $ 945,000
1) The pro forma total current assets amount is (See Table 3.4)
A) $470,900.
B) $500,000.
C) $575,000.
D) $525,000.
2) The pro forma net fixed assets amount is (See Table 3.4)
A) $575,000.
B) $650,000.
C) $500,000.
D) $600,000.
3) The pro forma current liabilities amount is (See Table 3.4)
A) $400,000.
B) $500,000.
C) $475,000.
D) $450,000.
4) The pro forma total liabilities amount is (See Table 3.4)
A) $500,000.
B) $650,000.
C) $700,000.
D) $550,000.
5) The pro forma accumulated retained earnings amount is (See Table 3.4)
A) $140,000.
B) $90,000.
C) $175,000.
D) $130,000.
6) The external financing required in 2004 will be (See Table 3.4)
A) $240,000.
B) $230,000.
C) $200,000.
D) $195,000.
7) General Talc Mines may prepare to (Sec Table 3.4)
A) cancel the retirement of the long term note to cover the needed financing.
B) eliminate the dividend to cover the needed financing.
C) repurchase common stock equal to the external funds requirement.
D) arrange for a loan equal to the external funds requirement.
8) The external funds requirement results primarily from (See Table 3.4)
A) low profit margin.
B) the retirement of debt and purchase of new fixed assets.
C) the payment of dividends.
D) high cost of sales.
9) If General Talc Mines cannot raise the external financing required through traditional credit channels, the firm
may (See Table 3.4)
A) sell common stock.
B) purchase additional fixed assets to raise productivity.
C) factor accounts receivable.
D) increase sales.
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