Example 1Workshop Four Practice ExercisesExample 1: Creating Proforma Financial StatementsThe 2019 Income Statement and Balance Sheet are given below for Mentor Johnson Enterprises. Using the assumptions provided, create the 2020 Pro Forma Income Statement and Balance Sheet. What is the External Funding Required?Mentor Johnson Enterprises.Mentor Johnson EnterprisesIncome Statement ($ thousands)Balance SheetsYear Ended December 31st, 2019Year Ended December 31st, 2019 ($ thousands)2019 ActualNet Sales$ 11,2312019 Actual2019 ActualCost of Goods Sold5,829Current AssetsCurrent LiabilitiesGross Profit$ 5,402 Cash and Securities$ 830 Accounts Payable$ 810 Accounts Receivable2,120 Accured Wages115Sales Commisions$ 562 Inventory830 Unearned Revenue1,240Warehouse Lease2,986 Total$ 3,780 Total$ 2,165Depreciation Expense450Operating Income (EBIT)$ 1,966Long-Term Debt$ 1,830Interest Expense183Net Fixed Assets$ 3,830Owner's EquityTaxable Income$ 1,783 Common Stock$ 100 Retained Earnings3,515Income Tax Expense374 Total$ 3,615Net Income$ 1,409Total Assets$ 7,610Total Liabilities and Owners' Equity$ 7,610Mentor Johnson Enterprises Assumptions for 2020Growth rate in Net Sales10%Long-Term Debt ($ estimate)$ 1,830Cost of Goods Sold (% of Sales)52%Cash/Securities (Days of Sales)25Sales Commissions (% of Sales)5%Accounts Receivable Period (Days)70Warehouse Lease (estimate $)$ 3,200Inventory Turnover7Depreciation Expense (estimate $)$ 465Accounts Payable Period (Days)30Interest Expense (Total estimate $)$ 247Accrued Wages ($ estimate)$ 135Tax Rate21%Unearned Revenue (% of Sales)10%Dividend Payout Ratio70%Net Fixed Assets ($ estimate)$ 4,180Assume the Interest Expense estimate includes the cost of any new debt required, and Common Stock will not change. Create the 2020 Pro Forma Balance Sheet and Income Statements. What is the External Funding Required?Use the space below to create your solution. If you get stuck, or when you are ready to check your answer, go to the next worksheet tab for the solution.This is the student Practice Problem file, provided in the assignment instructions October 2019 Ex # 1 Solution Workshop Four Practice ExercisesExample 1: Creating Proforma Financial StatementsThe 2019 Income Statement and Balance Sheet are given below for Mentor Johnson Enterprises. Using the assumptions provided, create the 2020 Pro Forma Income Statement and Balance Sheet. What is the External Funding Required?Mentor Johnson Enterprises.Mentor Johnson EnterprisesIncome Statement ($ thousands)Balance SheetsYear Ended December 31st, 2019Year Ended December 31st, 2019 ($ thousands)2019 ActualNet Sales$ 11,2312019 Actual2019 ActualCost of Goods Sold5,829Current AssetsCurrent LiabilitiesGross Profit$ 5,402 Cash and Securities$ 830 Accounts Payable$ 810 Accounts Receivable2,120 Accured Wages115Sales Commisions$ 562 Inventory830 Unearned Revenue1,240Warehouse Lease2 ...

1. Example 1Workshop Four Practice ExercisesExample 1:
Creating Proforma Financial StatementsThe 2019 Income
Statement and Balance Sheet are given below for Mentor
Johnson Enterprises. Using the assumptions provided, create
the 2020 Pro Forma Income Statement and Balance Sheet. What
is the External Funding Required?Mentor Johnson
Enterprises.Mentor Johnson EnterprisesIncome Statement ($
thousands)Balance SheetsYear Ended December 31st, 2019Year
Ended December 31st, 2019 ($ thousands)2019 ActualNet
Sales$ 11,2312019 Actual2019 ActualCost of Goods
Sold5,829Current AssetsCurrent LiabilitiesGross Profit$ 5,402
Cash and Securities$ 830 Accounts Payable$ 810 Accounts
Receivable2,120 Accured Wages115Sales Commisions$ 562
Inventory830 Unearned Revenue1,240Warehouse Lease2,986
Total$ 3,780 Total$ 2,165Depreciation
Expense450Operating Income (EBIT)$ 1,966Long-Term Debt$
1,830Interest Expense183Net Fixed Assets$ 3,830Owner's
EquityTaxable Income$ 1,783 Common Stock$ 100
Retained Earnings3,515Income Tax Expense374 Total$
3,615Net Income$ 1,409Total Assets$ 7,610Total Liabilities
and
Owners' Equity$ 7,610Mentor Johnson Enterprises
Assumptions for 2020Growth rate in Net Sales10%Long-Term
Debt ($ estimate)$ 1,830Cost of Goods Sold (% of
Sales)52%Cash/Securities (Days of Sales)25Sales Commissions
(% of Sales)5%Accounts Receivable Period (Days)70Warehouse
Lease (estimate $)$ 3,200Inventory Turnover7Depreciation
Expense (estimate $)$ 465Accounts Payable Period
(Days)30Interest Expense (Total estimate $)$ 247Accrued
Wages ($ estimate)$ 135Tax Rate21%Unearned Revenue (% of
Sales)10%Dividend Payout Ratio70%Net Fixed Assets ($
estimate)$ 4,180Assume the Interest Expense estimate
includes the cost of any new debt required, and Common Stock
will not change. Create the 2020 Pro Forma Balance Sheet and

2. Income Statements. What is the External Funding
Required?Use the space below to create your solution. If you
get stuck, or when you are ready to check your answer, go to the
next worksheet tab for the solution.This is the student Practice
Problem file, provided in the assignment instructions October
2019
Ex # 1
Solution
Workshop Four Practice ExercisesExample 1: Creating
Proforma Financial StatementsThe 2019 Income Statement and
Balance Sheet are given below for Mentor Johnson Enterprises.
Using the assumptions provided, create the 2020 Pro Forma
Income Statement and Balance Sheet. What is the External
Funding Required?Mentor Johnson Enterprises.Mentor Johnson
EnterprisesIncome Statement ($ thousands)Balance SheetsYear
Ended December 31st, 2019Year Ended December 31st, 2019 ($
thousands)2019 ActualNet Sales$ 11,2312019 Actual2019
ActualCost of Goods Sold5,829Current AssetsCurrent
LiabilitiesGross Profit$ 5,402 Cash and Securities$ 830
Accounts Payable$ 810 Accounts Receivable2,120 Accured
Wages115Sales Commisions$ 562 Inventory830 Unearned
Revenue1,240Warehouse Lease2,986 Total$ 3,780
Total$ 2,165Depreciation Expense450Operating Income
(EBIT)$ 1,966Long-Term Debt$ 1,830Interest

3. Expense183Net Fixed Assets$ 3,830Owner's EquityTaxable
Income$ 1,783 Common Stock$ 100 Retained
Earnings3,515Income Tax Expense374 Total$ 3,615Net
Income$ 1,409Total Assets$ 7,610Total Liabilities and
Owners' Equity$ 7,610Mentor Johnson Enterprises
Assumptions for 2020Growth rate in Net Sales10%Long-Term
Debt ($ estimate)$ 1,830Cost of Goods Sold (% of
Sales)52%Cash/Securities (Days of Sales)25Sales Commissions
(% of Sales)5%Accounts Receivable Period (Days)70Warehouse
Lease (estimate $)$ 3,200Inventory Turnover7Depreciation
Expense (estimate $)$ 465Accounts Payable Period
(Days)30Interest Expense (Total estimate $)$ 247Accrued
Wages ($ estimate)$ 135Tax Rate21%Unearned Revenue (% of
Sales)10%Dividend Payout Ratio70%Net Fixed Assets ($
estimate)$ 4,180Assume the Interest Expense estimate
includes the cost of any new debt required, and Common Stock
will not change. Create the 2020 Pro Forma Balance Sheet and
Income Statements. What is the External Funding
Required?Check below for a detailed solution to this
problem.Output area:Build the statements one line at a time,
using the assumptions given.Mentor Johnson
Enterprises.Income Statement ($ thousands)Pro Form Year
Ending December 31st, 20202020 ForecastNet Sales$
12,354New Net Sales = Old Sales X (1 + growth rate)Cost of
Goods Sold6,424New Cost of Goods Sold = New Sales X 52%

4. given assumptionGross Profit$ 5,930Sales
Commissions618New Sales Commissions = New Sales X 5%
given assumptionWarehouse Lease3,200Warehouse Lease cost
is given as an estimate… This is common. Sometimes estimates
are tied to sales, in other cases they are fixed costs that must be
estimated.Depreciation Expense465New Deprecation is given as
an estimateOperating Income (EBIT)$ 1,647Interest
Expense247Note Interest Expense is given… This is to simplify:
It eliminates the recursive calculation described in the
textbook.Taxable Income$ 1,400Otherwise you would have to
iterate, calculating the external funding required, which changes
the interest cost, which changes the external funding required,
and so on…Income Tax Expense294New Income Tax Expense =
Taxable Income X 21% rate givenNet Income$ 1,106Note the
Net Income has fallen significantly, even though sales has
grown 105!Mentor Johnson Enterprises.Note in order to
complete the calculations you will have to remember your ratio
training.Balance SheetsYou have to be able to convert days or
turnover ratios into Balance Sheet figures (see below)…Pro
Forma Year Ending December 31st, 2020 ($ thousands)2019
Actual2019 ActualCurrent AssetsCurrent LiabilitiesNew Cash =
(Days Sales in Cash / 365) X Sales Cash and Securities$ 846
Accounts Payable$ 528New A/P = (Payables Period / 365) X
COGSNew Accounts Receivable = (Receivables Period / 365) X
Sales Accounts Receivable2,369 Accured Wages135Accrued

5. Wages was given as an estimateNew Inventory = COGS /
Inventory Turnover Inventory918 Unearned
Revenue1,235New Unearned Revenue = Sales X Proportion
Given Total$ 4,133 Total$ 1,898Long-Term Debt$
1,830Long-Term Debt was given as an estimateNet Fixed Assets
is given as an estimate.Net Fixed Assets$ 4,180Owner's
EquityThe problem could also give you the Fixed Asset
purchases… Common Stock$ 100Common Stock given as no
change… and then the depreciation. Retained
Earnings3,847New Retained Earnings = Old Retained Earnings
+ Net Income X (1 - Payout Ratio)New Net Fixed Assets = Old
+ Purchases - Depreciation Total$ 3,947Total Assets$
8,313Total Liabilities and
Owners' Equity$ 7,675This is simply calculated as the sum…
Note in this case, the Balance Sheet doesn't balance!We need
external financing as the "plug variable" to make the Balance
Sheet balance.External Financing Needed:$ 638External
Financing Needed = Total Assets - Total Liabilities and
EquityThis is the student Practice Problem file, provided in the
assignment instructions October 2019
Example 2Assignment 4.4 ExercisesExample 2: Cash Flow
Timing (Preparing a Cash Budget)Wheeler, Inc.'s sales has
shown significant seasonality in the past, causing some
concerns about its cash flow. The company's estimated sales
and purchases for the past three months, plus projected sales

6. and purchases for the next three months, are shown
below:ActualForecastJanuaryFebruaryMarchAprilMayJuneSales
$ 250,000$ 350,000$ 700,000$ -$ 600,000$ 400,000$
300,000Purchases$ 250,000$ 500,000$ 450,000$ -$
285,000$ 200,000$ 200,000Only 20% of Wheeler's sales are
for cash. The company's Average Collection Period from
customers is 90 days. It's standard pay terms with suppliers is
45 days.a) What are the company's expected cash receipts in
June b)
What would the company's Accounts Receivable balance be at
the end of June? c) What are the
company's expected cash expenditures for purchases in June?d)
What would be the company's Accounts Payable balance at the
end of June?Use the space below to create your solution. If you
get stuck, or when you are ready to check your answer, go to the
next worksheet tab for the solution.This is the Instructor's
Confidential