XYZ EnterpriseExercise: Based on the information given, and using percentage of sales method, prepare:

a. Proforma profit and loss account for year ending 1987.

Proforma Profit and Loss Year 1987

Year19861987

Sales$1,200,000$1,350,000

Cost of goods sold900,0000.75001,012,500

Gross profit300,000337,500

Operating expenses 115,0000.0958129,375

Depreciation (10%)35,00043,000

Net profit before taxes185,000165,125

Taxes (40%)60,00066,050

Net profit after taxes125,00099,075

Dividend30,00060,000

Unappropriate profits$95,000$39,075

b. Proforma balance sheet ending 1987.

Proforma Balance Sheet 1987

Year19861987

Sales$1,200,000 $1,350,000

Assets:

Cash25,0000.020828,125

Short term investments75,0000.062584,375

Trade debtors200,000270,000

Stock150,0000.1250168,750

Total current assets450,000551,250

Net fixed assets350,000430,000

Total assets$800,000$981,250

Liabilities and capital:

Short term borrowings60,5000.050468,063

Trade creditors120,0000.1000135,000

Total current liabilities180,500203,063

Long term debt200,0000.1667225,000

Paid up capital225,000225,000

Reserve194,500233,575

Total liabilities and capital$800,000$886,638

c. Determine how much financing is needed.

Total assets - Total liabilities and capital = $981,250 - $886,638

= $94,613