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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
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Phoniex University
Oct-2001 - Nov-2016
The most recent financial statements for Retro Machine, Inc., follow. Sales for 2014 are projected to grow by 20 percent. Interest expense will remain constant; the tax rate and the dividend payout rate will also remain constant. Costs, other expenses, current assets and accounts payable increase spontaneously with sales.
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| RETRO MACHINE, INC. 2013 Income Statement |
||||||
| Â Â Sales | Â | Â | Â | $ | 750,850 | Â |
| Â Â Costs | Â | Â | Â | Â | 582,450 | Â |
| Â Â Other expenses | Â | Â | Â | Â | 18,350 | Â |
| Â | Â | Â | Â | Â | Â | Â |
| Â Â Earnings before interest and taxes | Â | Â | Â | $ | 150,050 | Â |
| Â Â Interest paid | Â | Â | Â | Â | 12,100 | Â |
| Â | Â | Â | Â | Â | Â | Â |
| Â Â Taxable income | Â | Â | Â | $ | 137,950 | Â |
| Â Â Taxes (40%) | Â | Â | Â | Â | 55,180 | Â |
| Â | Â | Â | Â | Â | Â | Â |
| Â Â Net income | Â | Â | Â | $ | 82,770 | Â |
| Â | Â | Â | Â | Â | Â | Â |
| Â Â Dividends | $ | 26,997 | Â | Â | Â | Â |
| Â Â Addition to retained earnings | Â | 55,773 | Â | Â | Â | Â |
| Â | ||||||
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| RETRO MACHINE, INC. Balance Sheet as of December 31, 2013 |
|||||||
| Assets |  | Liabilities and OwnersAc€?c Equity |  | ||||
| Â Â Current assets | Â | Â | Â | Â Â Current liabilities | Â | Â | Â |
| Â Â Â Â Cash | $ | 24,750 | Â | Â Â Â Â Accounts payable | $ | 62,910 | Â |
| Â Â Â Â Accounts receivable | Â | 37,350 | Â | Â Â Â Â Notes payable | Â | 16,380 | Â |
| Â | Â | Â | Â | Â | Â | Â | Â |
| Â Â Â Â Inventory | Â | 78,840 | Â | Â Â Â Â Â Â Total | $ | 79,290 | Â |
| Â | Â | Â | Â | Â | Â | Â | Â |
| Â Â Â Â Â Â Total | $ | 140,940 | Â | Â Â Long-term debt | $ | 142,900 | Â |
|   Fixed assets |  |  |  |   OwnersAc€?c equity |  |  |  |
| Â Â Â Â Net plant and equipment | $ | 373,410 | Â | Â Â Â Â Common stock and paid-in surplus | $ | 135,000 | Â |
| Â | Â | Â | Â | Â Â Â Â Accumulated retained earnings | Â | 157,160 | Â |
| Â | Â | Â | Â | Â | Â | Â | Â |
| Â | Â | Â | Â | Â Â Â Â Â Â Total | $ | 292,160 | Â |
| Â | Â | Â | Â | Â | Â | Â | Â |
|   Total assets | $ | 514,350 |  |   Total liabilities and ownersAc€?c equity | $ | 514,350 |  |
| Â | Â | Â | Â | Â | Â | Â | Â |
| Â | |||||||
|
In 2013, the firm operated at 80 percent of capacity. Construct the pro forma income statement and balance sheet for the company. Assume that the company cannot sell fixed assets. This implies that asset utilization may remain less than 100 percent next year as well. (Do not round intermediate calculations.) |
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| Pro Forma Income Statement | |||
| Â Â Sales | $ | Â | Â |
| Â Â Costs | Â | Â | Â |
| Â Â Other expenses | Â | Â | Â |
| Â | Â | Â | Â |
| Â Â EBIT | $ | Â | Â |
| Â Â Interest | Â | Â | Â |
| Â | Â | Â | Â |
| Â Â Taxable income | $ | Â | Â |
| Â Â Taxes (40%) | Â | Â | Â |
| Â | Â | Â | Â |
| Â Â Net income | $ | Â | Â |
| Â | Â | Â | Â |
| Â | |||
Â
| Pro Forma Balance Sheet | |||||||
| Assets |  | Liabilities and OwnersAc€?c Equity |  | ||||
| Â Â Current assets | Â | Â | Â | Â Â Current liabilities | Â | Â | Â |
| Â Â Â Â Cash | $ | Â | Â | Â Â Â Â Accounts payable | $ | Â | Â |
| Â Â Â Â Accounts receivable | Â | Â | Â | Â Â Â Â Notes payable | Â | Â | Â |
| Â | Â | Â | Â | Â | Â | Â | Â |
| Â Â Â Â Inventory | Â | Â | Â | Â Â Â Â Â Â Total | $ | Â | Â |
| Â | Â | Â | Â | Â | Â | Â | Â |
| Â Â Â Â Â Â Total | $ | Â | Â | Â Â Long-term debt | $ | Â | Â |
|   Fixed assets |  |  |  |   OwnersAc€?c equity |  |  |  |
| Â Â Â Â Net plant and equipment | $ | Â | Â | Â Â Â Â Common stock and paid-in surplus | $ | Â | Â |
| Â | Â | Â | Â | Â Â Â Â Accumulated retained earnings | Â | Â | Â |
| Â | Â | Â | Â | Â | Â | Â | Â |
| Â | Â | Â | Â | Â Â Â Â Â Â Total | $ | Â | Â |
| Â | Â | Â | Â | Â | Â | Â | Â |
|   Total assets | $ |  |  |   Total liabilities and ownersAc€?c equity | $ |  |  |
| Â | Â | Â | Â | Â | Â | Â | Â |
| Â | |||||||
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