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WALNUT GROVE TRIAL BALANCE For the Years Ended December 31, 2019 and December 31, 2020 2019...

WALNUT GROVE
TRIAL BALANCE
For the Years Ended December 31, 2019 and December 31, 2020
2019 2020
Debit Credit Debit Credit
Cash          185,500
Accounts Receivable          125,600
Inventory             55,000
Prepaid Expenses                            -
Building          275,000
Computers & Software             10,000
Furniture & Fixtures             25,000
Land             75,000
Machinery & Equipment                            -
Accumulated Depreciation             15,385
Accounts Payable             48,500
Payroll Tax Payable                1,050
Sales Tax Payable                7,913
Unearned Revenue                            -
Line of Credit          300,000
Notes Payable                            -
Peters, J., Capital                2,500
Peters, M., Capital                2,500
Retained Earnings          258,429
Custom Cabinet Sales                            -
Material & Supplies Sales          282,714
Small Tool Sales             34,932
Tool Rental Revenue             12,648
Vendor Compensation Revenue                     629
COGS: Custom Cabinets                            -
COGS: Material & Supplies             90,468
COGS: Small Tools             21,309
COGS: Wages             33,060
Depreciation Expense                8,775
Insurance Expense                6,300
Office Supplies Expense                1,435
Payroll Tax Expense                5,950
Postage Expense                     340
Small Tool Expense                6,041
Interest Expense             11,900
Income Tax Expense             30,522
         967,200          967,200

Using the 2019 trial balance and additional information below, prepare the projected (2020) financial statements for Walnut Grove. The prior year data (provided) is the starting point for your projections, and then each of the assumptions listed below will also be used.

Prepare an Excel workbook which contains the following information:

  • Tab 1: 2019 Trial Balance (provided in this document)

  • Tab 2: 2020 Projected Income Statement

  • Tab 3: 2020 Projected Balance Sheet

  • Tab 4: 2020 Projected Statement of Cash Flows Assumptions:

  1. Sales will change as follows:

    1. Material & Supplies Sales will increase 8.5%

    2. Small Tool Sales will increase 10%

    3. Tool Rental Revenue will continue throughout the 2020 year. An average of 20

      tools will be rented each week. The weekly rental per tool is $60. Assume that

      the average number of tools given will be rented for all 52 weeks.

  2. Vendor Compensation will increase consistently with the sum increase of Material &

    Supplies Sales and Small Tools Sales.

  3. Cost of sales for materials and supplies and small tools will increase proportionately based

    on their current percentage of sales, respectively. (HINT: You will need to use vertical

    analysis.)

  4. Small tools, including blades and other items, is expected to total $8,000 in 2020.

  5. Office supplies and postage are expected to increase by 35% during 2020.

  6. On January 1st, the company will invest $135,000 in new equipment for its custom cabinet

    division.
    a. This equipment will have a 5-year life and should be depreciated using the

    straight-line method. This purchase represents the only expected change to property, plant, and equipment.

b. The company will finance the equipment purchased with a 5 year note at 3.65% interest. You will need to use an amortization schedule to find the principle and interest payment amounts. The loan is paid monthly.

7. In relation to #6 above, the custom cabinet sales division begins operations in 2020. The following assumptions must be used to project the impact on the financial statements. (Hint: You may need to add accounts to the trial balance.)

  1. Walnut Grove anticipates that it will sell 110 cabinets at an average selling price of $2,700.

  2. Direct materials per cabinet are $850 per unit.

  3. The direct labor per cabinet is 5 hours, and Walnut Grove pays $30.00/hour for

    this labor.

  4. Factory overhead is calculated at 65% of direct labor.

  1. The building is being depreciated over a 39-year life.

  2. Because of the new cabinet division, yearly insurance costs will increase by $29,500,

    effective January 1. The company prepaid 2 years of this insurance and received a 5%

    discount for the 2-year prepayment.

  3. On January 1, a new cabinet division manager will be hired at a cost of $55,500. In

    additional to the new cabinet division manager, 3 new employees will be hired at an average wage of $18.50 per hour, employees work an average of 40 hours per week. Payroll taxes should be calculated at 20% of wages.

  4. With 22 weeks remaining in the year, 3 additional employees will be hired at a rate of $16.50 per hour, based on an average of 36 hours per week.

  5. The income tax rate is 21%.

  6. At the end of the year, Walnut Grove will have $68,000 in ending inventory.

  7. In relation #13, purchases are made evenly throughout the year and are paid in full in the

    month following purchase.

  8. Sales are collected in full the month following the sale. During the month of December,

    invoiced sales totaled $142,500.

  9. The sales tax rate is 6.3%.

  10. At the end of the year, Walnut Grove has received full payment for 25 custom cabinet

    orders that will be completed in January 2021.

Solutions

Expert Solution

Trial Balance 2019
Particulars Debit Credit
Cash $        185,500
Accounts Recievable $        125,600
Invetory $          55,000
Prepaid Expenses $                   -  
Building $        275,000
Computer and Software $          10,000
Furniture and Fixture $          25,000
Land $          75,000
Accumulated Depreciation $    15,385
Accounts Payable $    48,500
Payroll Tax Payable $      1,050
Sales Tax Payable $      7,913
Unearned Revenue $             -  
Line of Credit $ 300,000
Notes Payable $             -  
Peter J Capital $      2,500
Peter M Capital $      2,500
Retained Earnings $ 258,429
Custom Cabinet Sales $             -  
Material and Supplies Sales $ 282,714
Small Tool Sales $    34,932
Tool Rental Revenue $    12,648
Vendor Compensation Revenue $          629
COGS: Material and Supplies $          90,468
COGS: Custom Cabinets $                   -  
COGS : Small Tools $          21,309
COGS : Wages $          33,060
Depreciation Expenses $            8,775
Insurance Expense $            6,300
Office Supplies Expense $            1,435
Payroll Tax Expense $            5,950
Postage Expense $                340
Small Tool Expense $            6,041
Interest Expense $          11,900
Income Tax Expense $          30,522
Total $        967,200 $ 967,200
Projected Income Statement 2020
Particulars Amount Amount
Sales
Custom Cabinet Sales $        297,000
Material and Supplies Sales $        306,745
Small Tool Sales $          38,425
Tool Rental Revenue $          62,400
Vendor Compensation Revenue $                684 $ 705,254
COGS :
COGS: Material and Supplies $          98,158
COGS: Custom Cabinets $          93,500
COGS : Small Tools $          23,439
COGS : Wages $          16,500
Other Factory OH $          10,725 $ 242,323
EBITDA $ 462,931
Depreciation Expenses $          34,052
Interest Expenses $          16,828 $    50,880
Other Operational Expenses
Insurance Expense $          34,010
Office Supplies Expense $            1,937
Payroll Tax Expense $          42,029
Postage Expense $                459
Small Tool Expense $            8,000
Salaries and Wages $        210,144 $ 296,579
Profit Before Tax $ 115,473
Income Tax $    24,249
Retained Earnings $    91,223
Projected Balance Sheet 2020
Particulars Amount Amount
Assets
Cash $          13,347
Accounts Recievable
ekkarill92 answered 2 years ago
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