1. **State the problem:** We are given ABC Corporation's 2024 income statement and balance sheet. We need to create pro forma statements for 2025 assuming all items increase by 10% and no dividends are paid. Then, reconcile the pro forma balance sheet. 2. **Calculate 2025 Income Statement:** - Sales 2025 = Sales 2024 \times 1.10 = $15000 \times 1.10 = $16500 - Costs 2025 = Costs 2024 \times 1.10 = $12000 \times 1.10 = $13200 - Net Profit 2025 = Net Profit 2024 \times 1.10 = $3000 \times 1.10 = $3300 3. **Calculate 2025 Balance Sheet:** - Assets 2025 = Assets 2024 \times 1.10 = $6000 \times 1.10 = $6600 - Debt 2025 = Debt 2024 \times 1.10 = $4000 \times 1.10 = $4400 - Equity 2025 = Equity 2024 + Net Profit 2025 (since no dividends) = $2000 + $3300 = $5300 4. **Check if balance sheet balances:** - Total Liabilities and Equity 2025 = Debt 2025 + Equity 2025 = $4400 + $5300 = $9700 - Assets 2025 = $6600 5. **Reconcile:** The balance sheet does not balance because Total Liabilities and Equity ($9700) \neq Assets ($6600). 6. **Explanation:** Since all items except equity are increased by 10%, but equity is increased by net profit addition, the balance sheet totals do not match. To reconcile, either assets must increase to match liabilities and equity or the increase assumptions must be adjusted. **Final pro forma statements:** **Income Statement 2025:** - Sales: $16500 - Costs: $13200 - Net Profit: $3300 **Balance Sheet 2025:** - Assets: $6600 - Debt: $4400 - Equity: $5300 **Note:** The balance sheet is not balanced under given assumptions, indicating a need to revise assumptions or include additional financing or asset adjustments.