Amalgamated Enterprises Is Planning to Purchase Some New Equipment

question 13

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:
Amalgamated Enterprises Balance Sheet
Current assets $3,000,000
Fixed assets 12,000,000
Total assets $15,000,000
Accounts payable $4,000,000
Accrued expenses 1,000,000
Long-term debt 3,000,000
Common stock 2,000,000
Retained earnings 5,000,000
Total liabilities and net worth $15,000,000
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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Definitions:

Prejudice

A preconceived opinion or feeling, often negative, about a group or individual based on stereotypes rather than actual knowledge or reason.

Outgroup Members

Individuals who are perceived as not belonging to one's own group, often leading to biases and discrimination.

Team Assignments

Tasks or projects assigned to a group of individuals for collaborative work, aiming to pool skills, knowledge, and efforts.

Contact Hypothesis

A theory suggesting that under certain conditions, interpersonal contact is one of the most effective ways to reduce prejudice between majority and minority group members.