Kopp Corporations income statement and balance sheet for the year ending December 31, Year 1, are reproduced

Kopp Corporation’s income statement and balance sheet for the year ending December 31, Year 1, are reproduced below:

Additional Information:
1. Purchases in Year 1 are $450,000.
2. In Year 2, management expects 15% sales growth and a 10% increase in all expenses except for depreciation, which increases by 5%.
3. Inventory turnover for Year 1 is 5.0, and management expects an inventory turnover ratio of 6.0 for Year 2.
4. A receivable collection period of 90 days, based on year-end accounts receivable, is planned for Year 2.
5. Year 2 income taxes, at the same rate on pretax income in Year 1, will be paid in cash.
6. Notes payable of $20,000 will be paid in Year 2.
7. Long-term debt of $25,000 will be repaid in Year 2.
8. Kopp desires a minimum cash balance of $20,000 in Year 2.
9. The ratio of accounts payable to purchases will remain the same in Year 2 as in Year 1.

Required:
a. Prepare a statement of forecasted cash inflows and outflows (what-if analysis) for the year ending December 31, Year 2.
b. Will Kopp Corporation have to borrow money in Year2?

Transcribed Image Text:

KOPP CORPORATION Income Statement For Year Ended December 31, Year 1 Net sales Cost of goods sold. Gross profit. Depreciation expense Selling and administrative expenses Income before taxes Income taxes (48% Net income $960,000 (550,000) 410,000 30,000 160,000 (190,000) 220,000 (105.600) $114,400 KOPP CORPORATION Balance Sheet December 31, Year 1 Assets Current assets Cash Marketable securities Accounts receivable Inventory Total current assets 30,000 5,500 52,500 112,000 Plant and equipment Less: Accumulated depreciation . . Total assets $200,000 500,000 $700,000 630,000 (130,000) Liabilities and Equity Current liabilities Accounts payable Notes payablie Total current liabilities 60,000 50,000 $110,000 150,000 Long-term debt Capital stock Retained earnings 250,000 190,000 440,000 $700,000 Total liabilities and equity. …--