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Windswept, Incorporated
2021 Income statement (in millions)
Sales		$ 9,460
COGS		$ 7,710
Dep		$ 460
EBIT		$ 1,290
Interests		$ 102
Taxable income		$ 1,188
Tax		$ 249
Net income		$ 939

		Windswept, Incorporated
		2020 and 2021 Balance Sheets (in millions)
		2020	2021				2020	2021
Current assets					Current liabilities
Cash		$ 220	$ 250		Accounts payable		$ 1,330	$ 1,360
Accounts receivable		$ 980	$ 880		Long-term debt		$ 1,090	$ 1,290
Inventory		$ 1,780	$ 1,680		Common stock		$ 3,320	$ 3,220
Total CA		$ 2,980	$ 2,810		Retained earnings		$ 630	$ 880
Net fixed assets		$ 3,390	$ 3,940
Total assets		$ 6,370	$ 6,750		Total liabilities and equity		$ 6,370	$ 6,750

The company has predicted a sales increase of 20 percent.

The company pays out half of its net income in the form of a cash dividend (or the dividend payout ratio is 50%).

Costs and current assets vary with sales, but fixed assets, depreciation, interest expenses, debt, and equity do not.

Use the information shown above, and find the answer to the following questions:

a. Prepare the pro forma income statements.

b. Construct the pro forma balance sheets.

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