CHAPTER 4 B-45 This means that $13,600 of the new total debt is not raised externally. So, the debt raised externally, which will be the EFN is: EFN = New total debt – (Beginning LTD + Beginning CL + Spontaneous increase in AP) EFN = $315,044 – ($158,000 + 68,000 + 17,000 + 13,600) = $58,444 The pro forma balance sheet with the new long-term debt will be: MOOSE TOURS INC. Pro Forma Balance Sheet Assets Liabilities and Owners’ Equity Current assets Current liabilities Cash $ 30,360 Accounts payable $ 81,600 Accounts receivable 44,400 Notes payable 17,000 Inventory 104,280 Total $ 98,600 Total $ 183,480 Long-term debt 216,444 Fixed assets Net plant and Owners’ equity equipment 495,600 Common stock and paid-in surplus $ 140,000 Retained earnings 278,632 Total $ 418,632 Total liabilities and owners’ Total assets $ 697,080 equity $ 733,676 The funds raised by the debt issue can be put into an excess cash account to make the balance sheet balance. The excess debt will be: Excess debt = $733,676 – 697,080 = $54,596 To make the balance sheet balance, the company will have to increase its assets. We will put this amount in an account called excess cash, which will give us the following balance sheet:
B-46 SOLUTIONS MOOSE TOURS INC.
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