6-1: Use the information below to answer questions 1-4:

Income Statement Balance Sheet

December 31, 2015 December 31, 2015

(in thousands) (in thousands)

Sales $40,000 Assets:

COGS 18,200 Total Current Assets $100,000

21,800 Net Plant & Equipment 70,000

Total Assets $170,000

Selling Expenses 4,000

Depreciation 3,000 Liabilities & Equity:

Fixed Expenses 4,000 Accounts Payable $40,000

Notes Payable 10,000

EBIT 10,800 Accrued Expenses 10,000

Taxes (40%) 4,320

Bonds Payable 40,000

Net Income 6,480 Common Stock 40,000

Paid-in-Surplus 20,000

Common Stock Div. 1,200 Retained Earnings 10,000

$ 5,280

Total Liabilities & Equity $170,000

Sales for 2016 are projected to be $60,000; the firm currently uses straight line depreciation. No new equipment purchases are planned for 2016. There will be a 10% earnings distribution for 2016. Notes Payable will be paid off at the end of 2015.

1). Forecast net income for 2016.

2). Forecast retained earnings for 2016.

3). Forecast total assets for 2016.

4). Forecast additional funds needed in 2016.

6-2. Explain which of the following items would move spontaneously with sales and which would not.

a. Retained Earnings

b. Notes Payable

c. Accounts Receivable

d. Long-Term Debt

e. Accounts Payable