Asked on 20 Apr 2020

LUXIO GOLF CORP.
2009 Income Statement
Sales        $  285,760.00
Cost of Goods Sold            205,132.00
Depreciation              21,950.00
Earnings Before Interest & Tax        $    58,678.00
Interest Paid                9,875.00
Taxable Income        $    48,803.00
Taxes (35%)              17,081.05
Net Income        $    31,721.95
Dividends    $     18,000.00    
Addition to Retained Earnings           13,721.95    
         
         
         
         
LUXIO GOLF CORP.                      
2008 & 2009 Balance Sheets                      
Assets     Liabilities & Owner's Equity    
    2008   2009         2008   2009
Current Assets             Current Liabilities      
Cash    $  18,270.00    $  22,150.00 7.75%   Accounts Payable  $  16,215.00    $  17,318.00
Accounts Receivable        12,315.00        13,865.00 4.85%   Notes Payable        8,000.00        10,000.00
Inventory        21,584.00        24,876.00 8.71%   Other        11,145.00        14,451.00
Total Assets    $  52,169.00    $  60,891.00     Total    $  35,360.00    $  41,769.00
              Long-term Debt  $  80,000.00    $  85,000.00
Fixed Assets                      
Net Plant & Equipment    $168,326.00    $184,735.00     Owner's Equity      
              Common Stock & paid in Surplus  $  20,000.00    $  20,000.00
              Retained Earnings      85,135.00        98,857.00
              Total    $105,135.00    $118,857.00
                       
Total Assets    $220,495.00    $245,626.00     Total Liabilities & Owner's Equity  $220,495.00    $245,626.00
                       

 

Using the financial statements for 2009 as your ‘base’, assume that Luxio’s sales are 20% higher for 2010.  Use this projection to prepare the pro forma statements following the requirements listed below.  Assume the change in sales is permanent.

 

For the Income Statement: Cost of Goods Sold rate is expected to remain constant; ‘Depreciation’ and ‘Interest paid’ expenses are expected not to change; The Tax rate is expected to decrease to 32%; and Management is expected to increase the amount of dividends paid by 5% (therefore, the Dividend payout rate will increase by 5%). For the Balance Sheet: ‘Current assets’ change in direct proportion to sales; ‘Fixed assets’ are being operated at 100% of capacity; ‘Accounts payable’ changes in direct proportion to sales; ‘Notes payable’ and ‘Other’ current liabilities do not change; ‘Common stock’ remains unchanged; and Use ‘Long-term debt’ as the plug variable. Determine the amount of External Financing Needed (EFN) under the pro forma assumptions. Detail how this external financing is distributed.

Answered on 20 Apr 2020

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