Self-Check: Directions: Perform The Task Below. Write Your Answers On The Space Provided. You May Attach

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Name: ___________________________________________ Block: ____________

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Directions: Perform the task below. Write your answers on the space provided. You may attach
an extra sheet if needed.
PROJECTED FINANCIAL STATEMENT PREPARATION

Historical information:
Leonard Industries Leonard Industries
Income Statement Balance Sheet
For the year ended Dec. 31,2019 As of Dec. 31,2019
Net Sales 2,500,000 Assets Liabilities and Equity
Cost of sales 2,000,000
Gross Profit 500,000 Current Assets Current Liabilities
Trade payables 395,000
Operating expenses 82,000
Cash 45,000 Accruals 60,000
Operating income 418,000
Marketable securities 15,000 Other current liabilities 30,000
Interest Expense 25,000 Receivables 255,000 Total 485,000
Income before Inventories 340,000 Non-current Liabilities
393,000
taxes Long-term debt, net of
Taxes 117,900 Total Current Assets 655,000 350,000
current portion
Total liabilities 835,000
Net Income 275,100
Non-current Assets Stockholders’ equity
Property, plant, and
600,000 Capital stock 600,000
equipment, net
Other noncurrent
400,000 Retained earnings 220,000
assets
Total non-current Total stockholders’
1,000,000 820,000
assets equity
Total liabilities and
Total assets 1,655,000 1,655,000
stockholders’ equity
Leonard Industries wishes to prepare a pro forma income statement and balance sheet for
December 31, 2020. The following information has been gathered.
(1) Sales are expected to increase by 20% in 2020 from the 2019 sales level. This growth
assumption is based on the assessment of the external and internal factors related to the
Company and the historical growth of the company.
(2) The Company wants to maintain the same gross profit percentage per year as 2019.
(3) Operating expenses is composed of variable and fixed operating expenses. It will be projected
as follows: a) variable operating expense is 2% of the projected sales; b) fixed operating
expense attributable to depreciation expense is equal to P32,000.
(4) Interest expense will decrease by P2,000.
(5) Income tax rate is constant.
(6) No dividend payments were made to stockholders.
(7) A minimum cash balance of P100,000 is desired.
(8) Marketable securities are expected to remain unchanged.
(9) Accounts receivable represent 10% of sales.
(10) Inventories represent 12% of sales.
(11) A new machine costing P90,000 will be acquired during 2020. Total depreciation for the
year will be P32,000. Other non-current assets will increase by P50,000.
(12) Accounts payable represent 14% of sales.
(13) P300,000 of the long-term debt will be paid
(14) Accruals, other current liabilities, long-term debt, and common stock are expected to
remain unchanged.
(15) Retained earnings will increase by an amount equivalent to the computed net income from
the 2019 year-end projected income statement.
Page 22 of 24 FIN 11-MODULE 2

Required:
A. Prepare the pro-forma or projected income statement based on the given information above.
B. Use the judgmental approach to prepare a pro forma balance sheet dated December 31, 2020,
for Leonard Industries.
C. Use EFN (External Fund Needed) as a balancing figure.
D. Write the necessary computations for each account. Use the back portion of this paper to write
your solution.
Use the worksheet below to answer the task:
WORKSHEET – LEONARD INDUSTRIES FINANCIAL PROJECTION
Leonard Industries
Projected Income Statement
For the year ended Dec. 31,2020
Net Sales
Less: Cost of sales
Gross Profit
Less: Operating expenses
Operating income
Less: Interest Expense
Income before taxes
Less: Taxes
Net Income
Leonard Industries
Projected Balance Sheet
As of Dec. 31,2020
Assets Liabilities and Equity
Current Assets Current Liabilities

Trade payables
Cash Accruals
Marketable securities Other current liabilities
Receivables Total
Inventories Non-current Liabilities
Long-term debt, net of current
Total Current Assets
portion
Note payable (External Fund
needed
Total liabilities
Non-current Assets Stockholders’ equity
Property, plant, and
Capital stock
equipment, net
Other noncurrent assets Retained earnings
Total non-current assets Total stockholders’ equity
Total liabilities and stockholders’
Total assets
equity
Page 23 of 24 FIN 11-MODULE 2

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Name: _______________________________ Block:

PROJECTED FINANCIAL STATEMENT PREPARATION

Page 22 of 24 FIN 11-MODULE 2

Use the worksheet below to answer the task:

WORKSHEET – LEONARD INDUSTRIES FINANCIAL PROJECTION

Current Assets Current Liabilities

Page 23 of 24 FIN 11-MODULE 2

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