5) The Pepper Mill is operating at full capacity. Assets, costs, and current liabilities vary directly...

5) The Pepper Mill is operating at full capacity. Assets, costs, and current liabilities vary directly with sales. The dividend payout ratio is constant. The firm has sales of $42,700, net income of $5,500, total assets of $48,900, current liabilities of $3,650, long-term debt of $18,100, owners' equity of $27,150, and dividends of $1,925.

Prepare the Current Income Statement and Balance Sheet:

Prepare the Pro-Forma Income Statement and Balance Sheet:

What is the external financing need if sales increase by 14 percent?

Expert Solution

Income Statement
Particulars	Amount (USD)
Sales	42,700
Less: Cost of Sales	37,200
Net Income	5,500
Less: Dividends	1,925
Retained earnings	3,575

Balance Sheet
Particulars	Amount (USD)
Assets:
Total Assets	48,900

Liabilities and Equity:
Current liabilities	3,650
Long-term debt	18,100
Owners Equity	27,150
Total Equity & Liability	48,900

Proforma Income Statement and Balance Sheet.

Income Statement
Particulars	Amount (USD)
Sales	48,678
Less: Cost of Sales	42,408
Net Income	6,270
Less: Dividends	2,195
Retained earnings	4,076

Balance Sheet
Particulars	Amount (USD)
Assets:
Total Assets	48,900

Liabilities and Equity:
Current liabilities	3,650
Long-term debt	17,600
Owners Equity	27,651
Total Equity & Liability	48,900

Funding required is USD 770. as can be seen as difference of figures in Proforma and Current. This is actual Working capital increase due to increased sales.

jeff jeffy answered 1 year ago

Inhale, Inc., is currently operating at maximum capacity. All costs, assets, and current liabilities vary directly with sales.

2018 Income Statement Net sales $ 18,400 Cost of goods sold 15,200 Depreciation 700 Earnings before I and T $ 2,500 Interest paid 70 Taxable Income $ 2,430 Taxes 960 Net income $ 1,470 Dividends $ 390 Inhale, Inc. 2018 Balance Sheet 2018 2018 Cash $ 7,600 Accounts payable $ 6,840 Accounts rec. 2,200 Long-term debt 700 Inventory 8,200 Common stock $ 8,400 Total $ 18,000 Ret. Earnings 11,660 Net fixed assets 9,600 Total assets $ 27,600 Total liabilities &...

Sales will grow by 10% in 2020. All costs, assets, and current liabilities vary directly with sales

Income Statement Year 2019 2020 Net Revenue 140,000 - Cost of Goods Sold 70,000 - Depreciation Expense 9,000 EBIT 61,000 - Interest Expense 10,500 Income Before Taxes 50,500 Tax Expense 10,605 Net Income 2019 Dividend 39,895 9,974 Balance Sheet Year (end of) 2019 2020 2019 2020 Assets Liabilities Current Assets Current Liabilities Cash and Equivalents 10,000 Accounts Payable 21,000 Accounts Receivable 25,000 Long-term Debt 95,000 Inventory 12,000 Total Liabilities 116,000 Fixed Assets, Net 165,000 Stockholders' Equity Total Assets 212,000 Common...

Indicate which of the following current assets and current liabilities are operating accounts (O) and thus...

Indicate which of the following current assets and current liabilities are operating accounts (O) and thus included in the adjustment of net income to cash flow from operating activities and which are cash (C), investing (I), or financing (F) accounts. (a) Accounts payable (b) Accounts receivable (c) Notes payable (to bank) (d) Marketable securities (e) Accrued expenses (f) Inventory (g) Prepaid expenses (h) Current portion of long-term debt (i) Dividends payable (j) Income taxes payable (k) Interest payable (l) Certificates...

Changes in Current Operating Assets and Liabilities—Indirect Method Victor Corporation's comparative balance sheet for current assets...

Changes in Current Operating Assets and Liabilities—Indirect Method Victor Corporation's comparative balance sheet for current assets and liabilities was as follows: Dec. 31, Year 2 Dec. 31, Year 1 Accounts receivable $20,000 $16,700 Inventory 70,000 78,700 Accounts payable 7,700 9,400 Dividends payable 27,000 25,000 Adjust net income of $111,900 for changes in operating assets and liabilities to arrive at net cash flow from operating activities. b) ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ Staley Inc. reported the following data: Net income $284,400 Depreciation expense 67,900 Loss...

Changes in Current Operating Assets and Liabilities—Indirect Method Covington Corporation's comparative balance sheet for current assets...

Changes in Current Operating Assets and Liabilities—Indirect Method Covington Corporation's comparative balance sheet for current assets and liabilities was as follows: Dec. 31, Year 2 Dec. 31, Year 1 Accounts receivable $12,200 $15,500 Inventory 77,400 67,300 Accounts payable 18,000 21,400 Dividends payable 21,000 20,000 Adjust net income of $92,700 for changes in operating assets and liabilities to arrive at net cash flow from operating activities.

A company manufactures telephones. The company is currently operating at full capacity and variable manufacturing costs...

A company manufactures telephones. The company is currently operating at full capacity and variable manufacturing costs are charged to produce at the rate of 25% of direct labour cost. Consider the following information: Direct Materials cost per unit equals to 30€ Direct Labour cost per unit equals to 10€ Normal Production is 50.000 units per year The 30.000€ of Fixed Manufacturing Overheads cannot be eliminated in case the production stops and will have to be absorbed by other products. A...

A company, currently operating at full capacity, manufactures and sells saucepans at £2 each. Current...

A company, currently operating at full capacity, manufactures and sells saucepans at £2 each. Current volume is 100,000 pans per annum with the following cost structure. Operating Statement for year £ Sales (100,000 at £2) 200,000 less Marginal Cost Labour 80,000 Material 50,000 130,000 = Contribution 70,000 Fixed Costs 30,000 = Net profit £40,000 An opportunity has arisen to supply an additional 30,000 pans per annum at £1.18...

Company A is operating at full capacity, sold 45,600 units during the current year. Its income...

Company A is operating at full capacity, sold 45,600 units during the current year. Its income statement is as follows: Sales $5,654,400 Cost of goods sold 3,618,816 Gross profit $2,035,584 Expenses: Selling expenses $984,000 Administrative expenses 430,000 Total expenses 1,414,000 Income from operations $ 621,584 The division of costs between variable and fixed is as follows: (round to nearest dollar) Variable Fixed Cost of goods sold 70% 30% Selling expenses 20% 80% Administrative expenses 10% 90% Management is planning to...

If current assets is $200,000, and current liabilities is $50,000 . what will be the current...

If current assets is $200,000, and current liabilities is $50,000 . what will be the current ratio.?

Why are operating assets and liabilities important? How do we calculate net operating assets?

Question