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Balance Sheet as of December 31, 2018 (Thousands of Dollars) Cash $ 1,080 Accounts payable $...
Balance Sheet as of December 31, 2018 (Thousands of Dollars)
| Cash | $ 1,080 | Accounts payable | $ 4,320 | |
| Receivables | 6,480 | Accruals | 2,880 | |
| Inventories | 9,000 | Line of credit | 0 | |
| Total current assets | $16,560 | Notes payable | 2,100 | |
| Net fixed assets | 12,600 | Total current liabilities | $ 9,300 | |
| Mortgage bonds | 3,500 | |||
| Common stock | 3,500 | |||
| Retained earnings | 12,860 | |||
| Total assets | $29,160 | Total liabilities and equity | $29,160 |
Income Statement for January 1 - December 31, 2018 (Thousands of Dollars)
| Sales | $36,000 |
| Operating costs | 32,440 |
| Earnings before interest and taxes | $ 3,560 |
| Interest | 460 |
| Pre-tax earnings | $ 3,100 |
| Taxes (40%) | 1,240 |
| Net income | $ 1,860 |
| Dividends (45%) | $ 837 |
| Addition to retained earnings | $ 1,023 |
- Suppose 2019 sales are projected to increase by 20% over 2018
sales. Use the forecasted financial statement method to forecast a
balance sheet and income statement for December 31, 2019. The
interest rate on all debt is 12%, and cash earns no interest
income. Assume that all additional debt in the form of a line of
credit is added at the end of the year, which means that you should
base the forecasted interest expense on the balance of debt at the
beginning of the year. Use the forecasted income statement to
determine the addition to retained earnings. Assume that the
company was operating at full capacity in 2018, that it cannot sell
off any of its fixed assets, and that any required financing will
be borrowed as notes payable. Also, assume that assets, spontaneous
liabilities, and operating costs are expected to increase by the
same percentage as sales. Determine the additional funds needed. Do
not round intermediate calculations. Round your answers to the
nearest dollar.
Total assets: $
AFN: $ - What is the resulting total forecasted amount of the line of
credit? Do not round intermediate calculations. Round your answer
to the nearest dollar.
$ - In your answers to Parts a and b, you should not have charged
any interest on the additional debt added during 2019 because it
was assumed that the new debt was added at the end of the year. But
now suppose that the new debt is added throughout the year. Don't
do any calculations, but how would this change the answers to parts
a and b?
If debt is added throughout the year rather than only at the end of the year, interest expense will be higher or lower than in the projections of part a. This would cause net income to be higher or lower, the addition to retained earnings to be higher or lower, and the AFN to be higher or lower . Thus, you would have to add or subtract from new debt.
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jeff jeffy answered 1 year agoRelated Solutions
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Earnings before interest and taxes
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Krogh Lumber: Balance Sheet as of December 31, 2016 (Thousands of Dollars) Cash $1,800 Accounts payable...
Krogh Lumber: Balance Sheet as of December 31, 2016 (Thousands
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Receivables 10,800 Notes payable 3,472
Inventories 12,600 Accrued liabilities 2,520
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Net fixed assets 21,600 Common stock 2,000
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Dansko Integrated
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Accounts Payable
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Accounts Receivable
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Inventory
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Other Liabilities
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Property Plant & Equipment, Gross
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Total Liabilities
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Accumulated Depreciation
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Paid-In Capital
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Property Plant & Equipment, Net
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Accounts Payable
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Accounts Receivable
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Debt
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Inventory
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Other Liabilities
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Property Plant & Equipment, Gross
212,000
Total Liabilities
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Accumulated Depreciation
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Paid-In Capital
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Property Plant & Equipment, Net
140,000
Retained Earnings
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30
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Account
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35
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Accts Receivable
5
20
Bank Loan
25
25
Inventory
100
100
Accrued
Taxes
15 25
Current Assets
135
245
Long Term, Dept current portion
12 12
Current
Liabilities
87 112
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200
250
Long-Term
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100 95
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100 100
Additional paid-in...
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$6,000
Accounts Payable
$3,000
Accounts Receivable
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Common Stock
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Retained Earnings
$4,000
Total Liability and Stockholders' Equity
Total Assets
$10,000
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$6,000
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$3,000
Accounts Receivable
$4,000
Stockholders' Equity
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$3,000
Retained Earnings
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Total Liability and Stockholders' Equity
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$10,000
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On January 1st, 2019, ABC Corp bought an equipment
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On May 1st, 2018, ABC Corp received $1,200 cash for
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Use T-accounts to record the transactions below, which occur on
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