Question

Ambrose Inc. published the following financial statements in its 2016 annual report

Income statement
For the year ending December 31, 2016

sales $500,000

Cost of goods sold 350000   

Gross profit 150,000

Operating expenses $75,000

Depreciation 20,000

95,000

EBIT   55,000
? Interest expense 20,000

EBT 35,000
? Tax Expense 12,250

EAT   22,750

Dividends 10,000
Addition to retained earnings$ 12,750

Sales in 2017 are estimated to be $650,000. Forecast the 2017 income statement, balance sheet, and statement of cash flow assuming:

Balance Sheet December 31, 2016

Cash $25,000
Marketable securities 10,000

Accounts receivable 50,000

Inventories   85,000
Plant, net 200,000

TOTAL ASSETS $370,000

Accounts payable 60,000

Accrued payables . 35,000

Bonds payable 140,000

Common stock 105,000

Retained earnings 30,000

Total Liabilities & Equity 370,000

sales in 2017 are estimated to be $650,000. Forecast the 2017 income statement, balance sheet, and statement of cash flow assuming:

(a) cost of goods sold, $30,000 of operating expenses and depreciation are variable;
(b) the reminder of operating expenses is fixed;
(c) cash, accounts receivable, inventories, net plan, accounts payable, and accrued payables are spontaneous;
(d) marketable securities, bonds payable, and common stock are discretionary;
(e) $10,000 of bonds payable are current and will be repaid at the beginning of the year; and
(f) the firm will maintain its 2016 dividend payout ratio in 2017.

Answer 1

Income Statement for the year ending 2017
		Amount in $
Sales		650000
cost of goods sold (350,000/500,000)*650,000		455000
Gross profit		195000
Operating Expenses (30,000+   (45000/500,000)*650000)		88500
Depreciation (20,000/500000)*650,000		26000
EBIt		80500
Interest expense (20,000/140,000 )*130,000		18571
EBT		61929
tax expense (12250/35000) *61929		21675
EAT		40254
Dividends (10,000/22750) *40254		17694
Addition to retained earnings		22560

Balance sheet , December 31, 2017
		Amount in $
Cash	25000/500,000   *650000	32500
Marketable securities
Account receivables	50000/500,000   *650000	65000
Inventories	85000/500,000   *650000	110500
Plant Net	200000/500,000   *650000	260000
Total Assets		468000
Accounts payables	60000/500,000   *650000	78000
Accured Payables	35000/500,000   *650000	45500
Bonds payables		130000
Common Stock		105000
retained Earnings		52560
External Finance needed		56940
Total		468000
Force the pro-forma balance sheet to balance Since total assets exceeds total projected liabilities and Equity, this firm will need external financing of $56940
					Proforma For cash flow Statement For the year ending December 31, 2017 Amount in $ CASH FLOW FROM Operations Received from Customers (50,000+650000-65000) 635000 paid to Suppliers & Employees -530500 Interest paid -18571 Income tax paid -21675 Net cash provided by Operating Activities 64254 Cash flow from investing Activities Payment Plant & Equipment (260,000+26000-200000) -86000 Net cash provided by Investing Activities -86000 Cash flow financeing Activities paid to Bonds payable -10000 External Finance needed 56940 Dividends paid -17694 Net cash from Financing Activities 29246 Net Increse /(Decrese) in CASH 7500 Cash & Cash Equalents , Beginning of the year 25000 Cash & Cash Equalents , End of the year 32500 Paid to Expenses , payables and Inventories Opening payables and inventories (60000+35000) 95000 Add: Expenses During the year    (455000+88500) 543500 Less: Closing payables (78000+45500) -123500 515000 Increse in invenotories (110500-85000) 25500 540500 Less: Bonds payable Has been Excluded from Current Liabilities -10000 Total Amount Paid 530500