Amalgamated Enterprises Is Planning to Purchase Some New Equipment

question 112

Essay

Amalgamated Enterprises is planning to purchase some new equipment.With this new equipment,the company expects sales to increase from $8,000,000 to $10,000,000.A portion of the financing for the purchase of the equipment will come from a $1,000,000 new common stock issue.The company knows that current assets,fixed assets,accounts payable,and accrued expenses increase in direct proportion with sales.The company's net profit margin on sales is 8%,and the company plans to pay 40% of its after-tax earnings in dividends.A copy of the company's current balance sheet is given below:
Prepare a pro forma balance sheet for Amalgamated for next year using the percent-of-sales method and the information provided above.

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