Forecast Balance Sheet. Adelberg Electronics, Inc. designs and assembles electronic systems used by a variety of organizations.

Question:

Forecast Balance Sheet. Adelberg Electronics, Inc. designs and assembles electronic systems used by a variety of organizations. Its principal products are medical measurement systems and instrumentation systems for chemical analyses.

As a member of the budgeting team, your assignment is to prepare the budgeted balance sheet, based on information provided by other team members. The latest actual balance sheet shows:

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Joe Silk, another member of the team, has given you the following budgeted income statement for the coming year:

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The controller has also furnished you with a number of assumptions, policies, and other information as follows:
1. The company has made arrangements to acquire plant and equipment during the year for $\$ 339$ million. Long-term debt will finance $\$ 18$ million, and cash will be used for the remainder.
2. All sales are on credit. Collections on credit sales for the year are scheduled to be $\$ 3,218$ million.
3. Changes in several account balances are planned.

(a) Inventories will decrease by $\$ 15$ million.

(b) Other accrued liabilities will increase by $\$ 70$ million.

(c) Prepaid expenses will increase by $\$ 10$ million.
4. Depreciation expense in the forecast income statement totals $\$ 105$ million.
5. Payments of accounts payable will total $\$ 2,682$ million and on accrued income taxes will be $\$ 179$ million.
6. Common stock will be sold to employees in a special stock purchase plan for $\$ 34$ million.
7. Dividends of $\$ 29$ million will be declared and paid during the year.
Required 1. Prepare a forecast balance sheet 2. Does the proposed financing of new plant and equipment strain the cash position? Explain.
3. Identify several danger areas in the forecast that might cause the asset acquisition to be difficult to finance. What other sources of cash might exist?