Question

Larime Corp. is forecasting 20X2 near the end of 20X1. The estimated year-end financial statements and a worksheet for the forecast are given below.

Management expects the following next year.

• An 9% increase in revenue.
• Price cutting will cause the cost ratio (COGS/sales) to deteriorate (increase) by 2% (of sales) from its current level.
• Expenses will increase at a rate that is three quarters of that of sales.
• The current accounts will increase proportionately with sales.
• Net fixed assets will increase by $5 million.
• All interest will be paid at 12%.
• Federal and state income taxes will be paid at a combined rate of 43%.

Make a forecast of Larime's complete income statement and balance sheet. Enter your dollar answers in thousands. For example, an answer of $12 thousands should be entered as 12, not 12,000. Round percentage values to 1 decimal place. Enter all amounts as a positive numbers.

Larime Corp. Projected Income Statement ($000)
	20X1				20X2
	$		%		$	%
Revenue	$245,876		100.0		$	100.0
COGS	145,794		59.3
Gross Margin	$100,082		40.7		$
Expenses	49,578		20.2
EBIT	$50,504		20.5		$
Interest (12%)	9,579		3.9
EBT	$40,925		16.6		$
Inc Tax (43%)	17,598		7.2
Net Income	$23,327		9.4		$

Larime Corp. Projected Balance Sheet ($000)
	ASSETS			LIABILITIES & EQUITY
	20X1	20X2		20X1	20X2
C/A	$179,157	$	C/L	$83,574	$
F/A	133,478		Debt	77,648
Total	$312,635	$	Equity	151,413
			Total	$312,635	$

Answer 1

Particulars	20X1	20X1	20X2	20X2	Remarks
	Amount	%	Amount	%
Revenue	$ 2,45,876.00	100.0%	$              2,68,004.84	100.0%	9% Increase
COGS	$ 1,45,794.00	59.3%	$              1,64,286.97	61.3%
Gross Margin	$ 1,00,082.00	40.7%	$              1,03,717.87	38.7%
Expenses	$      49,578.00	20.2%	$                  72,130.35	26.9%	6.75% Increase (9*3/4)
EBIT	$      50,504.00	20.5%	$                  31,587.53	11.8%
Interest (12%)	$        9,579.00	3.9%	$                    9,579.00	3.6%
EBT	$      40,925.00	16.6%	$                  22,008.53	8.2%
Income Tax	$      17,597.75	7.2%	$                    9,463.67	3.5%
Net Income	$      23,327.25	9.5%	$                  12,544.86	4.7%
Particulars	Assets	Particulars	Liabilities & Equity
	20X1	20X2		20X1	20X2
Current Assets	$ 1,79,157.00	$ 1,95,281.13	Current Liabilities	$      83,574.00	$                        92,153.30
Fixed Assets	$ 1,33,478.00	$ 1,38,478.00	Debt	$      77,648.00	$                        77,648.00
			Equity	$ 1,51,413.00	$                    1,63,957.86
Total	$ 3,12,635.00	$ 3,33,759.13	Total	$ 3,12,635.00	$                    3,33,759.16