S&S Air

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3. Depreciation percentage=$1,640,200/$15,411,620 = 10.64%
New Fixed Assets=$15,411,620 + $30,000,000 = $45,411,620
$45,411,620*.1064 = $4,831,796 new depreciation

Pro forma Income Statement

Sales ($36,599,300*1.12)$40,991,216
Cost of Goods Sold ($26,669,496*1.12) 29,869,836
Other Expenses ($4,641,000*1.12) 5,197,920
Depreciation 4,831,796
EBIT 1,091,664
Interest 573,200
Taxable Income 518,464
Taxes (40%) 207,386
Net Income $311,078

Dividends ($311,0786*0.30)$93,323
Add to Retained Earnings $217,755

Pro forma Balance Sheet

AssetsLiabilities and Stockholder’s Equity
Current AssetsCurrent Liabilities
Cash ($396,900*1.12)$444,528 Accounts Payable ($844,550*1.12) $945,896 Accounts Receivable ($637,560*1.12) 714,067 Notes Payable 1,928,500 Inventory ($933,400*1.12)1,045,408Total Current Liabilities 2,874,396

Total Current Assets $2,204,003Long-term Debt $5,050,000 Fixed Assets
Net Plant and Stockholder’s Equity
Equipment $45,411,620 Common Stock $322,500
Retained Earnings 9,451,685
Total Equity $9,774,185

Total Assets $47,615,623 Total Liabilities and Stockholder’s Equity $17,698,581

EFN=$47,615,623-$17,698,581 = $29,917,042

Since the fixed assets have increased at a faster percentage than sales, capacity utilization for next year will decrease because the addition of the new line would expand capacity much more than would normally be required.
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