Edman Company is a merchandiser that has provided the following balance sheet and income statement for this
Question:
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:
- Next year’s ending balance in accounts receivable decreases by $80,000 compared to its beginning balance.
- Next year’s ending balance in inventory decreases by $120,000 compared to its beginning balance.
- Next year’s ending balance in property, plant, and equipment (net) decreases by $40,000 compared to its beginning balance to reflect next year’s depreciation expense.
- Next year’s ending balance in accounts payable decreases by $40,000 compared to its beginning balance.
- Next year’s ending balance in bonds payable decreases by $300,000 compared to its beginning balance to reflect a retirement of bonds payable.
- Next year’s ending balances in other assets and common stock are the same as their beginning balances.
- Next year’s total sales, variables expenses, fixed expenses, and net operating income are the same as this year.
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?