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Financial information on AAA Ltd. is shown below. AAA Ltd. Income Statement For the Year Ended...

Financial information on AAA Ltd. is shown below.

AAA Ltd. Income Statement
For the Year Ended December 31st,
	2019	2018
Sales	5,375,250	4,025,350
Cost Of Goods Sold	2,835,450	2,105,837
Other Expenses	1,100,500	1,058,600
Depreciation	75,500	67,800
Earnings Before Interest and Taxes	1,363,800	793,113
Interest Expense	84,350	68,925
Earnings Before Taxes	1,279,450	724,188
Taxes (30%)	383,835	217,256
Net Income	$ 895,615	$ 506,932

AAA Ltd. Balance Sheet
As at December 31st,
ASSETS	2019	2018
Cash & Equivalent	67,250	53,925
Short-term investments	225,783	192,243
Inventories	1,522,500	1,407,530
Accounts Receivable	303,200	221,058
Total Current Assets	2,118,733	1,874,756
Prop, Plant & Equip - Net	2,582,989	2,002,958
Total Assets	$ 4,701,672	$ 3,877,714

LIABILITIES & EQUITY
Accounts Payable	392,952	275,929
Notes Payable	101,982	89,203
Accruals	76,205	57,292
Short-term Debt	325,029	317,416
Total Current Liabilities	896,168	739,840
Long-Term Debt	1,054,024	873,204
Total Liabilities	1,950,192	1,613,044
Common Share Capital	650,000	650,000
Retained Earnings	2,101,480	1,614,670
Total Equity	2,751,480	2,264,670
Total Liabilities and Equity	$ 4,701,672	$ 3,877,714

Sales are forecast to increase by 20% in 2020.

Notes Payable, Short-term Debt, Long-term Debt, and Common Share Capital will not change. Net Plant and Equipment is forecasted to be $2,900,000 next year. Short-term investments are expected to be $240,000.

In 2020, the company’s dividend payout ratio will be 40%.

In 2020, cost of goods sold is expected to be 52% of sales. Other expenses will be 23% of sales. Depreciation expense in 2020 is expected to be $90,000.

Cash is expected to be 2% of sales, and inventories will be 30% of sales. Accounts receivable will be 6% of sales. Accounts payable will be 5% of sales. Accruals will be 1% of sales.

The company is expected to pay 4% per year compounded annually on its short-term debt and 6% per year compounded annually on its long-term debt. The interest expense on the short-term debt in 2020 is calculated as: [interest rate on short-term debt * amount of short-term debt outstanding at the end of 2019]. The interest expense on the long-term debt is calculated as: [interest rate on long-term debt * amount of long-term debt outstanding at the end of 2019].

The company’s tax rate is 30%.

Based on the information provided you are to:

Complete the pro-forma income statement and balance sheet for 2020.
Calculate the amount of Additional Funds Needed in 2020.

Expert Solution

Answer is as below:

jeff jeffy answered 3 years ago

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