Answer:
Peabody & Peabody
a. Peabody & Peabody
Pro Forma Balance Sheet
December 31, 2021 ($000)
Cash                             480
Marketable securities 200
Accounts receivable 1,440
Inventories                2,160
Total current assets 4,280
Net fixed assets       4,820
Total assets              9,100
Liabilities and Stockholders equity:
Accounts payable          1,680
Accruals                           500
Other current liabilities     80
Total current liabilities 2,260
Long-term debt           2,000
Total liabilities             4,260
Common equity         3,900            
Total liabilities and stockholders’ equity $8,160
Required Finance         940
b. From the statement prepared in part a, it is clear that Peabody & Peabody requires new financing of $940,000 for 2020 to meet the projected assets base.
Explanation:
a) Data and Calculations:
2019 Sales = $10 million
Pro Forma Balance Sheet
December 31, 2017 ($000)
Assets:
Cash                             400
Marketable securities 200
Accounts receivable 1,200
Inventories                1,800
Total current assets 3,600
Net fixed assets       4,000
Total assets              7,600
Liabilities and Stockholders equity:
Accounts payable          1,400
Accruals                           400
Other current liabilities     80
Total current liabilities  1,880
Long-term debt           2,000
Total liabilities              3,880
Common equity           3,720
Total liabilities and stockholders’ equity $7,600
Purpose: To analyze expected performance and financing needs for 2021.
1. Percent of Sales ($12 million)
Accounts receivable, 12%  $1,440
Inventory, 18%                    $2,160
Accounts payable, 14%      $1,680
Net profit margin, 3%          $360
2. Market securities            $200
3. Cash balance (desired minimum) $480
4. Net fixed assets           4,000
New equipment in 2020    650
Depreciation, 2020           (290)
New equipment in 2021    850
Depreciation, 2021            (390)
Net fixed assets            $4,820
5. Accruals                       $500
8. Dividend payout = 50% of $360 = $180
Retained Earnings (current) = $180
Common Equity:
2019    3,720
Income   180 (Retained Earnings)
2020  3,900