Consider the following simplified financial statements for the Yoo Corporation (assuming no...


Consider the following simplified financial statements for the Yoo corporation(assuming no income taxes):
Income Statement Balance Sheet
Sales $38,400 Assets $23,100 Debt $6,100
Costs $30,760 Equity $17,000
Net income $7,640 Total $23,100 Total $23,100
The company has predicted a sales increase of 8 percent.Assume Yoo pays out half of net income in the form of a cash dividend. Costs and assets vary with sales,but debt and equity do not.
Prepare the proforma statements
What is the external financing needed?

Income Statement:

The income statement is a financial statement that is prepared to determine the profit or loss that the business is making. The profit or loss is determined by deducting all the expenses from the revenue.

Answer and Explanation:

Proforma statements are shown below:

Pro forma income statement Pro forma balance sheet
Particulars Amount ($) Particulars Amount ($) Particulars Amount ($)
Sales 41,472 Assets 24,948 Debt 6,100
Costs (33,221) Total equity (WN 1) 21,125.5
Net income 8,251 Total assets 24,948 Total liabilities and equity 27,225.5

Working Notes (WN 1):

Total equity = Equity + Retained earnings

Total equity = 17,000 + 4,125.5

Total equity = $21,125.5

Dividend is calculated as follow:

{eq}Dividend \ = \ \dfrac{Net \ income}{2} \\ Dividend \ = \ \dfrac{8,251}{2} \\ Dividend \ = \ \$4,125.5 {/eq}

External financing needed is calculated as follow:

External financing needed = Total assets - Total liabilities and equity

External financing needed = 24,948 - 27,225.5

External financing needed = -$2,277.5.

Learn more about this topic:

What Is an Income Statement? - Purpose, Components & Format

from Accounting 101: Financial Accounting

Chapter 2 / Lesson 2

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