Question

In: Accounting

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 of Dollars)
Cash $1,800 Accounts payable $7,200
Receivables 10,800 Notes payable 3,472
Inventories 12,600 Accrued liabilities 2,520
Total current assets $25,200 Total current liabilities $13,192
Mortgage bonds 5,000
Net fixed assets 21,600 Common stock 2,000
Retained earnings 26,608
Total assets $46,800 Total liabilities and equity $46,800


Krogh Lumber: Income Statement for December 31, 2016 (Thousands of Dollars)
Sales $36,000
Operating costs including depreciation 30,783
Earnings before interest and taxes $5,217
Interest 1,017
Earnings before taxes $4,200
Taxes (40%) 1,680
Net income $2,520
Dividends (60%) $1,512
Addition to retained earnings $1,008

Assume that the company was operating at full capacity in 2016 with regard to all items except fixed assets; fixed assets in 2016 were being utilized to only 65% of capacity. By what percentage could 2017 sales increase over 2016 sales without the need for an increase in fixed assets? Round your answer to two decimal places.
%

Now suppose 2017 sales increase by 25% over 2016 sales. Assume that Krogh cannot sell any fixed assets. All assets other than fixed assets will grow at the same rate as sales; however, after reviewing industry averages, the firm would like to reduce its operating costs/sales ratio to 84% and increase its total liabilities-to-assets ratio to 42%. The firm will maintain its 60% dividend payout ratio, and it currently has 1 million shares outstanding. The firm plans to raise 35% of its 2017 forecasted interest-bearing debt as notes payable, and it will issue bonds for the remainder. The firm forecasts that its before-tax cost of debt (which includes both short- and long-term debt) is 10.5%. Any stock issuances or repurchases will be made at the firm's current stock price of $40. Develop Krogh's projected financial statements. What are the balances of notes payable, bonds, common stock, and retained earnings? Round your answers to the nearest hundredth of thousand of dollars.

Krogh Lumber Pro Forma Income Statement December 31, 2017 (Thousands of Dollars)
2016 2017
Sales $36,000 $?
Operating costs (includes depreciation) 30,783
EBIT $5,217 $?
Interest expense 1,017
EBT $4,200 $
Taxes (40%) 1,680
Net Income $2,520 $?
Dividends $1,512 $?
Addition to RE $1,008 $?


Krogh Lumber Pro Forma Balance Statement December 31, 2017 (Thousands of Dollars)
2016 2017
Assets
Cash $1,800   $?
Accounts receivable 10,800
Inventories 12,600
Fixed assets 21,600
Total assets $46,800 $?
Liabilities and Equity
Payables + accruals $9,720 $?
Short-term bank loans 3,472
Total current liabilities $13,192 $?
Long-term bonds 5,000
Total liabilities $18,192   $?
Common stock 2,000
Retained earnings 26,608
Total common equity $28,608 $?
Total liab. and equity $46,800 $?

Solutions

Expert Solution


Related Solutions

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 of Dollars) Cash $1,800 Accounts payable $7,200 Receivables 10,800 Notes payable 3,472 Inventories 12,600 Accrued liabilities 2,520 Total current assets $25,200 Total current liabilities $13,192 Mortgage bonds 5,000 Net fixed assets 21,600 Common stock 2,000 Retained earnings 26,608 Total assets $46,800 Total liabilities and equity $46,800 Krogh Lumber: Income Statement for December 31, 2016 (Thousands of Dollars) Sales $36,000 Operating costs including depreciation 30,783 Earnings before interest and taxes $5,217...
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...
Krogh Lumber's 2016 financial statements are shown here. Krogh Lumber: Balance Sheet as of December 31,...
Krogh Lumber's 2016 financial statements are shown here. Krogh Lumber: Balance Sheet as of December 31, 2016 (Thousands of Dollars) Cash $1,800 Accounts payable $7,200 Receivables 10,800 Notes payable 3,472 Inventories 12,600 Accrued liabilities 2,520 Total current assets $25,200 Total current liabilities $13,192 Mortgage bonds 5,000 Net fixed assets 21,600 Common stock 2,000 Retained earnings 26,608 Total assets $46,800 Total liabilities and equity $46,800 Krogh Lumber: Income Statement for December 31, 2016 (Thousands of Dollars) Sales $36,000 Operating costs including...
Stevens Textile: Balance Sheet as of December 31, 2006 (Thousands of Dollars) Cash $ 1,080 Accounts...
Stevens Textile: Balance Sheet as of December 31, 2006 (Thousands of Dollars) Cash $ 1,080 Accounts Payable $ 4,320 Receivables 6,480 Accruals 2,880 Inventories 9,000 Notes payable 2,100      Total current assets $16,560      Total current liabilities $ 9,300 Net fixed assets 12,600 Mortgage bonds 3,500 Common stock 3,500 Retained earnings 12,860 Total assets $29,160      Total liabilities and equity $29,160 Stevens Textile: Income Statement as of December 31, 2006 (Thousands of Dollars) Sales $36,000 Operating costs 32,440      Earnings...
Dansko Integrated Balance Sheet As of December 31, 2019 (amounts in thousands) Cash 99,000 Accounts Payable...
Dansko Integrated Balance Sheet As of December 31, 2019 (amounts in thousands) Cash 99,000 Accounts Payable 27,000 Accounts Receivable 45,000 Debt 35,000 Inventory 38,000 Other Liabilities 10,000 Property Plant & Equipment, Gross 235,000 Total Liabilities 72,000 Accumulated Depreciation 67,000 Paid-In Capital 80,000 Property Plant & Equipment, Net 168,000 Retained Earnings 214,000 Other Assets 16,000 Total Equity 294,000 Total Assets 366,000 Total Liabilities & Equity 366,000 Dansko Integrated Statement of Cash Flows January 1 to March 31, 2020 (amounts in thousands)...
Lightspeed Industries Balance Sheet As of December 31, 2019 (amounts in thousands) Cash 106,000 Accounts Payable...
Lightspeed Industries Balance Sheet As of December 31, 2019 (amounts in thousands) Cash 106,000 Accounts Payable 26,000 Accounts Receivable 32,000 Debt 30,000 Inventory 41,000 Other Liabilities 7,000 Property Plant & Equipment, Gross 212,000 Total Liabilities 63,000 Accumulated Depreciation 72,000 Paid-In Capital 80,000 Property Plant & Equipment, Net 140,000 Retained Earnings 246,000 Other Assets 70,000 Total Equity 326,000 Total Assets 389,000 Total Liabilities & Equity 389,000 Lightspeed Industries Statement of Cash Flows January 1 to March 31, 2020 (amounts in thousands)...
Stealcase’s Balance Sheet, as of December 31(thousands of dollars)                                 
Stealcase’s Balance Sheet, as of December 31(thousands of dollars)                                              2017      2018                                                                            2017      2018 Cash                                 30            25                  Account Payable                                  35          50 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 Net Plant & Equip           200          250                 Long-Term Dept                                100        95                                                                                  Common Stock (10,000 shares)    100      100                                                                                 Additional paid-in...
EXCESS CAPACITY Krogh Lumber's 2016 financial statements are shown here. Krogh Lumber: Balance Sheet as of...
EXCESS CAPACITY Krogh Lumber's 2016 financial statements are shown here. Krogh Lumber: Balance Sheet as of December 31, 2016 (Thousands of Dollars) Cash $1,800 Accounts payable $7,200 Receivables 10,800 Notes payable 3,472 Inventories 12,600 Accrued liabilities 2,520 Total current assets $25,200 Total current liabilities $13,192 Mortgage bonds 5,000 Net fixed assets 21,600 Common stock 2,000 Retained earnings 26,608 Total assets $46,800 Total liabilities and equity $46,800 Krogh Lumber: Income Statement for December 31, 2016 (Thousands of Dollars) Sales $36,000 Operating...
EXCESS CAPACITY Krogh Lumber's 2016 financial statements are shown here. Krogh Lumber: Balance Sheet as of...
EXCESS CAPACITY Krogh Lumber's 2016 financial statements are shown here. Krogh Lumber: Balance Sheet as of December 31, 2016 (Thousands of Dollars) Cash $1,800 Accounts payable $7,200 Receivables 10,800 Notes payable 3,472 Inventories 12,600 Accrued liabilities 2,520 Total current assets $25,200 Total current liabilities $13,192 Mortgage bonds 5,000 Net fixed assets 21,600 Common stock 2,000 Retained earnings 26,608 Total assets $46,800 Total liabilities and equity $46,800 Krogh Lumber: Income Statement for December 31, 2016 (Thousands of Dollars) Sales $36,000 Operating...
EXCESS CAPACITY Krogh Lumber's 2016 financial statements are shown here. Krogh Lumber: Balance Sheet as of...
EXCESS CAPACITY Krogh Lumber's 2016 financial statements are shown here. Krogh Lumber: Balance Sheet as of December 31, 2016 (Thousands of Dollars) Cash $1,800 Accounts payable $7,200 Receivables 10,800 Notes payable 3,472 Inventories 12,600 Accrued liabilities 2,520 Total current assets $25,200 Total current liabilities $13,192 Mortgage bonds 5,000 Net fixed assets 21,600 Common stock 2,000 Retained earnings 26,608 Total assets $46,800 Total liabilities and equity $46,800 Krogh Lumber: Income Statement for December 31, 2016 (Thousands of Dollars) Sales $36,000 Operating...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT