Consider the following simplified financial statements for the Fire Corporation (assuming no income taxes):

Consider the following simplified financial statements for the Fire Corporation (assuming no income taxes):

Income Statement				Balance Sheet
Sales	$	30,900		Assets	$	25,450		Debt	$	6,950
Costs		23,060						Equity		18,500
Net income	$	7,840		Total	$	25,450		Total	$	25,450

The company has predicted a sales increase of 12 percent. Assume Fire 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 pro forma statements. (Round your answers to the nearest whole dollar amount.)

Pro forma income statement			Pro forma balance sheet
Sales	$		Assets	$		Debt	$
Costs						Equity
Net income	$		Total	$		Total	$

Determine the external financing needed. (Negative amount should be indicated by a minus sign.)

External financing needed

$

Explanation:

Dividends	=	$4,390
Add. to RE	=	$4,390

Note that the balance sheet does not balance. This is due to EFN. The EFN for this company is:

EFN	=	Total assets – Total liabilities and equity
EFN	=	$28,504 – 29,840
EFN	=	-$1,336