Forecasted Balance Sheet and Income Statement Ryan Company wishes to prepare a forecasted income statement and a

Question:

Forecasted Balance Sheet and Income Statement Ryan Company wishes to prepare a forecasted income statement and a forecasted balance sheet for 2012. Ryan’s balance sheet and income statement for 2011 follow.

Balance Sheet 2011

Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10

Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250

Property, plant, and equipment, net . . . . . . . . . . . . . . . . . . . . . 800

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,060

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 100

Bank loans payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 700

Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260

Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . .$1,060

Income Statement 2011

Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,000

Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 750

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 250

Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80

Operating profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 130

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

Income before taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 60

Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 40

In addition, Ryan has assembled the following forecasted information regarding 2012:

(a) Sales are expected to increase to $1,500.

(b) Ryan expects to become more efficient at utilizing its property, plant, and equipment in 2012. Therefore, Ryan expects that the sales increase will not require any increase in property, plant, and equipment. Accordingly, the year 2012 property, plant, and equipment balance is expected to be $800.

Instructions:

Prepare a forecasted balance sheet and a forecasted income statement for 2012. Clearly state what assumptions you make.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...