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Financing Deficit

Garlington Technologies Inc.'s 2019 financial statements are shown below:

Income Statement for December 31, 2019

Sales	$4,000,000
Operating costs	3,200,000
EBIT	$ 800,000
Interest	120,000
Pre-tax earnings	$ 680,000
Taxes (25%)	170,000
Net income	510,000
Dividends	$ 190,000

Balance Sheet as of December 31, 2019

Cash	$ 160,000		Accounts payable	$ 360,000
Receivables	360,000		Line of credit	0
Inventories	720,000		Accruals	200,000
Total CA	$1,240,000		Total CL	$ 560,000
Fixed assets	4,000,000		Long-term bonds	1,000,000
Total Assets	$5,240,000		Common stock	1,100,000
			RE	2,580,000
			Total L&E	$5,240,000

Suppose that in 2020 sales increase to $4.2 million and that 2020 dividends will increase to $134,000. Forecast the financial statements using the forecasted financial statement method. Assume the firm operated at full capacity in 2019. The long-term bonds have an interest rate of 11%. New financing will be with a line of credit. Assume it will be added at the end of the year. Cash does not earn any interest income. Enter your answers as positive values. Do not round intermediate calculations. Round your answers to the nearest dollar.

THE ONLY MISSING ONES ARE IN ITALIC AND HAVE A LINE FOR THE ANSWER (Garlington Technologies Inc. Pro Forma Balance Statement December 31, 2020)______

Garlington Technologies Inc. Pro Forma Income Statement December 31, 2020 Sales $ 4,200,000 Operating costs $ 3,360,000 EBIT $ 840,000 Interest $ 110,000 Pre-tax earnings $ 730,000 Taxes (25%) $ 182,500 Net income $ 547,500 Dividends: $ 134,000 Addition to RE: $ 413,500

Garlington Technologies Inc. Pro Forma Balance Statement December 31, 2020

Cash $ ________ Receivables $ 378,000 Inventories $ 756,000 Total current assets $ __________ Fixed assets $ _________ Total assets $ _________ Accounts payable $ 378,000 Line of credit $ __________ Accruals $ 210,000 Total current liabilities $ _________ LT bonds $ 1,000,000 Common stock $ 1,100,000 Retained earnings $ _________ Total L&E $ ____________

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