In: Accounting
Edman Company is a merchandiser that has provided the following
balance sheet and income statement for this year.
Beginning Balance | Ending Balance | ||||
Assets | |||||
Cash | $ | 62,800 | $ | 150,000 | |
Accounts receivable | 160,000 | 180,000 | |||
Inventory | 230,000 | 240,000 | |||
Property, plant & equipment (net) | 833,000 | 793,000 | |||
Other assets | 37,000 | 37,000 | |||
Total assets | $ | 1,322,800 | $ | 1,400,000 | |
Liabilities & Stockholders’ Equity | |||||
Accounts payable | $ | 70,000 | $ | 80,000 | |
Bonds payable | 550,000 | 550,000 | |||
Common stock | 410,000 | 410,000 | |||
Retained earnings | 292,800 | 360,000 | |||
Total liabilities & stockholders’ equity | $ | 1,322,800 | $ | 1,400,000 | |
This Year | ||
Sales | $ | 2,500,000 |
Variable expenses: | ||
Cost of goods sold | 1,600,000 | |
Variable selling expense | 240,000 | |
Total variable expenses | 1,840,000 | |
Contribution margin | 660,000 | |
Fixed expenses: | ||
Fixed selling expenses | 220,000 | |
Fixed administrative expenses | 300,000 | |
Total fixed expenses | 520,000 | |
Net operating income | 140,000 | |
Interest expense (8%) | 44,000 | |
Net income before tax | 96,000 | |
Tax expense (30%) | 28,800 | |
Net income | $ | 67,200 |
Req A
1. Inventory _____
2. Accounts Payable _____
3. Retained Earnings ____
Reg B
1. Inventory ____
2. Accounts Payable ____
3. Retained Earnings ____
Reg C
1. What is the company’s estimated average total liabilities and stockholders’ equity for next year?
To evaluate alternative 1, refer to the “Requirement 3 Financials” tab within your template. Assume the company streamlines it working capital management practices with the following estimated impacts:
a. Based on the above estimated impacts, use Excel formulas to calculate ending balances as needed in column C. What is the ending balance in the following accounts?
b. Create formulas within column D that calculate next year’s average balances for all balance sheet accounts (except Cash which will automatically be computed for you). What is the average balance in the following accounts?
c. What is the company’s estimated average total liabilities and stockholders’ equity for next year?
Introduction:
This question is related with financial statements of the company. Here company wants it know about Inventory, Trade receivables and Trade payables. Also on the basis of additional information given in question estimated balance sheet is prepared.
PART-A
BALANCE SHEET
Balance Sheet |
||
Particulars |
Beginning Balance |
Ending Balance |
Assets |
$ |
$ |
Cash |
62,800 |
1,50,000 |
Accounts receivable |
1,60,000 |
1,80,000 |
Inventory |
2,30,000 |
2,40,000 |
Property, plant & equipment (net) |
8,33,000 |
7,93,000 |
Other assets |
37,000 |
37,000 |
Total assets |
13,22,800 |
14,00,000 |
Liabilities & Stockholders’ Equity |
||
Accounts payable |
70,000 |
80,000 |
Bonds payable |
5,50,000 |
5,50,000 |
Common stock |
4,10,000 |
4,10,000 |
Retained earnings |
2,92,800 |
3,60,000 |
Total liabilities & stockholders’ equity |
13,22,800 |
14,00,000 |
PART-B
INCOME STATEMENT
Income Statement |
||
$ |
$ |
|
Sales |
25,00,000 |
|
Variable expenses: |
||
Cost of goods sold |
16,00,000 |
|
Variable selling expense |
2,40,000 |
18,40,000 |
Contribution margin |
6,60,000 |
|
Fixed expenses: |
||
Fixed selling expenses |
2,20,000 |
|
Fixed administrative expenses |
3,00,000 |
5,20,000 |
Net operating income |
1,40,000 |
|
Interest expense (8%) |
44,000 |
|
Net income before tax |
96,000 |
|
Tax expense (30%) |
28,800 |
|
Net income |
67,200 |
Req-A
Beginning Balances: $
1. Inventory $ 230000
2. Accounts Payable $ 70000
3. Retained Earnings $ 292800
Req-B
Ending Balance: $
1. Inventory $ 240000
2. Accounts Payable $ 80000
3. Retained Earnings $ 360000
Req-C
Estimated Balance sheet for next Year
Particulars |
Beginning Balance |
Ending Balance |
Increase/ Decrease |
Estimated Balances |
Assets |
$ |
$ |
$ |
|
Cash |
62,800 |
1,50,000 |
5,27,200 |
|
Accounts receivable |
1,60,000 |
1,80,000 |
-80,000 |
1,00,000 |
Inventory |
2,30,000 |
2,40,000 |
-1,20,000 |
1,20,000 |
Property, plant & equipment (net) |
8,33,000 |
7,93,000 |
-40,000 |
7,53,000 |
Other assets |
37,000 |
37,000 |
37,000 |
|
Total assets |
13,22,800 |
14,00,000 |
15,37,200 |
|
Liabilities & Stockholders’ Equity |
||||
Accounts payable |
70,000 |
80,000 |
-40,000 |
40,000 |
Bonds payable |
5,50,000 |
5,50,000 |
-3,00,000 |
2,50,000 |
Common stock |
4,10,000 |
4,10,000 |
4,10,000 |
8,20,000 |
Retained earnings |
2,92,800 |
3,60,000 |
67,200 |
4,27,200 |
Total liabilities & stockholders’ equity |
13,22,800 |
14,00,000 |
15,37,200 |
|
Summary: Estimated balalnce sheet will helpful to the company for taking decision related with up coming year. Cash balance will be the differencial amount on assets side.