Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Can you solve the following & Balance Sheet using the Facts given? begin{tabular}{|c|c|c|c} hline & & & C hline 1 & & Taylor Auto
Can you solve the following & Balance Sheet using the Facts given?
\begin{tabular}{|c|c|c|c} \hline & & & C \\ \hline 1 & & Taylor Auto Repair \& Maintenance \\ \hline \end{tabular} Case Facts and Assumptions 3 Module 10 Exercise Taylor Auto Repair wants to evaluate the possibility of adding additional bays to their existing facility to increase volume. The new bays would be identical to the existing bay, so many of the inputs would be identical in proportion to sales. In order to add additional bays, the facility would need to lease more space in its' building, and purchase new 4 equipment. The facility would be constructed in 2021, and begin operations in 2022. Using the 2020 operating results for Taylor, create pro forma financial statements that can measure the feasibility and financial performance of this potential project. Please consider the following facts: $38,000 Revenue attributed to New Repair Bays in 2022 3.50% Repair Revenue Growth YoY The following Items should grow in proportion to revenue: COGS Salaries Benefits \& Pensions Advertising Sales, General \& Administrative (SG\&A) Repairs Insurance Expense Miscellaneous Expenses Rent is usually determined as the price per square foot per year as follows: $12.00 per square foot/year 3,400 square feet currently leased to Taylor 1,250 additional square feet needed for new service bays 8.00% Interest Charges on existing notes payable New Equipment will be required if the new bays were added, as follows: $165,000 Taylor equipment purchased in 2022 $16,500 Annual depreciation expense attributable to the new equipment 10.00% of equipment cost paid in cash in 2022 90.00% of equipment cost financed in 2022 8.00% Interest Charges on the financed portion of the new equipment $40,000 Architectural/Installation Fees required, to be incurred in 2021 $145,000 Construction Fees required, to be incurred in 2021 Architectural, Installation and Construction Fees should be categorized as Professional Fees on the IS Additional facts to consider; 12.85\% Payroll tax rate payable on Wages \& Salaries (FICA, Medicare, FUTA, SUTA) 40.00% Dividend rate of Net Income paid out as dividends as required by the BoD $38,000 Annual depreciation expense attributable to existing equipment $50,000 Annual principle payments on notes payable only if net income is positive (will reduce principle amount for next year) 27.00% Income Tax Rate charged on EBT (if EBT is positive) NET OPERATING INCOME $ 60,542$ Taylor Auto Repair \& Maintenance Multi-Step Income Statement EARNINGS BEFORE TAX $ 6,607$ $ $ $ Less Income Taxes 27.00% of EBT (1,784)$ NET INCOME $ 4,823$ $ A C D E F G J Balance Sheet ASSETS Current Assets 2020 \begin{tabular}{l} \hline Surplus Cash ( \\ \hline Accounts Rece \\ \hline Inventory \\ \hline Other Current \\ \hline Total Current Assets \\ \hline \end{tabular} TOTAL ASSETS $ 402,087$ $ LIABILITIES Long-Term Liabilities Notes Payable \begin{tabular}{|l|l|l|l|ll|ll|ll|} \hline \multicolumn{2}{|c|}{2020} & \multicolumn{2}{c|}{2021} & & 2022 & & 2023 & & 2024 \\ \hline$ & 254,428 & $ & 204,428 & $ & - & $ & - & $ & - \\ \hline$ & 254,428 & $ & - & $ & - & $ & - & $ & - \\ \hline \end{tabular} TOTAL LIABILITIES $368,135$ $ $ $ EQUITY Shareholder's Equity TOTAL LIABILITIES \& EQUITY $ 402,087$ \begin{tabular}{|c|c|c|c} \hline & & & C \\ \hline 1 & & Taylor Auto Repair \& Maintenance \\ \hline \end{tabular} Case Facts and Assumptions 3 Module 10 Exercise Taylor Auto Repair wants to evaluate the possibility of adding additional bays to their existing facility to increase volume. The new bays would be identical to the existing bay, so many of the inputs would be identical in proportion to sales. In order to add additional bays, the facility would need to lease more space in its' building, and purchase new 4 equipment. The facility would be constructed in 2021, and begin operations in 2022. Using the 2020 operating results for Taylor, create pro forma financial statements that can measure the feasibility and financial performance of this potential project. Please consider the following facts: $38,000 Revenue attributed to New Repair Bays in 2022 3.50% Repair Revenue Growth YoY The following Items should grow in proportion to revenue: COGS Salaries Benefits \& Pensions Advertising Sales, General \& Administrative (SG\&A) Repairs Insurance Expense Miscellaneous Expenses Rent is usually determined as the price per square foot per year as follows: $12.00 per square foot/year 3,400 square feet currently leased to Taylor 1,250 additional square feet needed for new service bays 8.00% Interest Charges on existing notes payable New Equipment will be required if the new bays were added, as follows: $165,000 Taylor equipment purchased in 2022 $16,500 Annual depreciation expense attributable to the new equipment 10.00% of equipment cost paid in cash in 2022 90.00% of equipment cost financed in 2022 8.00% Interest Charges on the financed portion of the new equipment $40,000 Architectural/Installation Fees required, to be incurred in 2021 $145,000 Construction Fees required, to be incurred in 2021 Architectural, Installation and Construction Fees should be categorized as Professional Fees on the IS Additional facts to consider; 12.85\% Payroll tax rate payable on Wages \& Salaries (FICA, Medicare, FUTA, SUTA) 40.00% Dividend rate of Net Income paid out as dividends as required by the BoD $38,000 Annual depreciation expense attributable to existing equipment $50,000 Annual principle payments on notes payable only if net income is positive (will reduce principle amount for next year) 27.00% Income Tax Rate charged on EBT (if EBT is positive) NET OPERATING INCOME $ 60,542$ Taylor Auto Repair \& Maintenance Multi-Step Income Statement EARNINGS BEFORE TAX $ 6,607$ $ $ $ Less Income Taxes 27.00% of EBT (1,784)$ NET INCOME $ 4,823$ $ A C D E F G J Balance Sheet ASSETS Current Assets 2020 \begin{tabular}{l} \hline Surplus Cash ( \\ \hline Accounts Rece \\ \hline Inventory \\ \hline Other Current \\ \hline Total Current Assets \\ \hline \end{tabular} TOTAL ASSETS $ 402,087$ $ LIABILITIES Long-Term Liabilities Notes Payable \begin{tabular}{|l|l|l|l|ll|ll|ll|} \hline \multicolumn{2}{|c|}{2020} & \multicolumn{2}{c|}{2021} & & 2022 & & 2023 & & 2024 \\ \hline$ & 254,428 & $ & 204,428 & $ & - & $ & - & $ & - \\ \hline$ & 254,428 & $ & - & $ & - & $ & - & $ & - \\ \hline \end{tabular} TOTAL LIABILITIES $368,135$ $ $ $ EQUITY Shareholder's Equity TOTAL LIABILITIES \& EQUITY $ 402,087$Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started