23) The firm has a negative net cash flow in the month(s) of ________. (See Table 4.3)
A) January, February, and March
B) February and March
C) January and February
D) February
24) The ending cash balance for March is ________. (See Table 4.3)
A) $250
B) $6,750
C) $2,500
D) $500
25) The ending cash balance for February is ________. (See Table 4.3)
A) $750
B) $1,750
C) $2,500
D) -$1,000
26) At the end of May, the firm has an ending cash balance of ________. (See Table 4.3)
A) $9,000
B) $16,750
C) $14,250
D) $12,000
27) The firm has a total financing requirement of ________ for the period from February through
May. (See Table 4.3)
A) $ 0
B) $1,750
C) $1,250
D) $ 750
28) If a pro forma balance sheet dated at the end of May was prepared from the information
presented, the marketable securities would total ________. (See Table 4.3)
A) $9,000
B) $9,500
C) $12,000
D) $16,750
Table 4.4
Use the percent-of-sales method to prepare a pro forma income statement for the year ended
December 31, 2015, for Hennesaw Lumber, Inc.
Hennesaw Lumber, Inc. estimates that its sales in 2000 will be $4,500,000. Interest expense is to
remain unchanged at $105,000 and the firm plans to pay cash dividends of $150,000 during
2015. Hennesaw Lumber, Inc.’s income statement for the year ended December 31, 2014 is
shown below. From your preparation of the pro forma income statement, answer the following
multiple choice questions.
29) The pro forma net profits after taxes for 2015 are ________. (See Table 4.4)
A) $202,500
B) $207,000
C) $52,500
D) $57,000
30) The pro forma cost of goods sold for 2015 is ________. (See Table 4.4)
A) $3,500,000
B) $3,750,000
C) $3,825,000
D) $4,000,000
31) The pro forma operating expenses for 2015 are ________. (See Table 4.4)
A) $150,000
B) $200,000
C) $210,000
D) $225,000
32) The pro forma accumulated retained earnings account on the balance sheet is projected to be
________. (See Table 4.4)
A) $62,500
B) $52,500
C) $57,000
D) $67,000
65
Table 4.5
A financial manager at General Talc Mines has gathered the financial data essential to prepare a
pro forma balance sheet for cash and profit planning purposes for the coming year ended
December 31, 2015. Using the percent-of-sales method and the following financial data, prepare
the pro forma balance sheet in order to answer the following multiple choice questions.
(a) The firm estimates sales of $1,000,000.
(b) The firm maintains a cash balance of $25,000.
(c) Accounts receivable represents 15 percent of sales.
(d) Inventory represents 35 percent of sales.
(e) A new piece of mining equipment costing $150,000 will be purchased in 2010.
Total depreciation for 2010 will be $75,000.
(f) Accounts payable represents 10 percent of sales.
(g) There will be no change in notes payable, accruals, and common stock.
(h) The firm plans to retire a long term note of $100,000.
(i) Dividends of $45,000 will be paid in 2015.
(j) The firm predicts a 4 percent net profit margin.
Balance Sheet
General Talc Mines
December 31, 2014
33) The pro forma total current assets amount is ________. (See Table 4.5)
A) $470,900
B) $500,000
C) $525,000
D) $575,000
34) The pro forma net fixed assets amount is ________. (See Table 4.5)
A) $500,000
B) $575,000
C) $600,000
D) $650,000
35) The pro forma current liabilities amount is ________.(See Table 4.5)
A) $400,000
B) $450,000
C) $475,000
D) $500,000
36) The pro forma total liabilities amount is ________. (See Table 4.5)
A) $500,000
B) $550,000
C) $700,000
D) $650,000
37) The pro forma accumulated retained earnings amount is ________. (See Table 4.5)
A) $90,000
B) $175,000
C) $140,000
D) $130,000
38) The external financing required in 2015 will be ________. (See Table 4.5)
A) $230,000
B) $240,000
C) $0
D) $195,000
39) General Talc Mines may prepare to ________. (See Table 4.5)
A) arrange for a loan equal to the external funds requirement
B) eliminate the dividend to cover the needed financing
C) cancel the retirement of the long term note to cover the needed financing
D) repurchase common stock equal to the external funds requirement
40) The external funds requirement results primarily from ________. (See Table 4.5)
A) the payment of dividends
B) the retirement of debt and purchase of new fixed assets
C) low profit margin
D) high cost of sales
41) If General Talc Mines cannot raise the external financing required through traditional credit
channels, the firm may ________. (See Table 4.5)
A) increase sales
B) purchase additional fixed assets to raise productivity
C) sell common stock
D) factor accounts receivable
42) Income Statement
Huddleston Manufacturing Company
For the Year Ended December 31, 2015
Huddleston Manufacturing estimates its sales in 2016 will be $3 million. Interest expense is
expected to remain unchanged at $70,000, and the firm plans to pay cash dividends of $140,000
during 2016. Use the percent-of-sales method to prepare a pro forma income statement for the
year ended December 31, 2016, based on the 2015 income statement shown above.
43) Calculate the amount of accounts receivable assuming that a pro forma balance sheet dated at
the end of May was prepared from the information presented. (See Table 4.3)