ConocoPhillips Corporation

Consolidated Income Statement

For year ended December 31, Year 1

ConocoPhillips Corporations income statement and balance sheet for the year ended December 31, Year 1 are reproduced below:

Particulars		Amount ($)
Sales		$9,70,000
Cost of goods sold (excluding depreciation)		(5,60,000)
Gross profit		4,10,000
Selling and administrative expenses	1,60,000
Depreciation expenses	30,000
		(1,90,000)
Income before taxes		2,20,000
Income taxes		(1,05,600)
Net income		$1,14,400

ConocoPhillips Corporation

Balance Sheet Statement

December 31, Year 1

Particulars	Amount ($)	Amount ($)
Assets
Current Assets
Cash		$30,000
Marketable securities		5,500
Accounts receivable		52,000
Inventory		1,12,500
Total current assets		2,00,000
Plant and Equipment	6,30,000
Less: Accumulated depreciation	(1,30,000)
Plant and Equipment (net)		5,00,000
Total assets		$7,00,000
Liabilities and Equity
Current liabilities
Accounts Payable	60,000
Notes payable	50,000
Total current liabilities		1,10,000
Long term debt		1,50,000
Total liabilities		2,60,000
Equity
Capital stock	2,50,000
Retained earnings	1,90,000
Total equity		4,40,000
Total liabilities and equity		$7,00,000

Additional Information:

• Purchases in year 1 are $4, 50,000.

• In year 2, management expects 15% sales growth and a 10% increases in all expenses except for depreciation, which increases by 5%.

• Management expects an inventory turnover ratio for year 1 is 5.00 and inventory turnover ratio 6.00 for year 2.

• A receivable collection period of 90 days, based on year end accounts receivable, is planned for year 2.

• Year 2 income taxes, at the same rate of pretax income for year 1, will be paid in cash.

• Notes payable at the end of year will be $20,000.

• Long term debt of $25,000 will be paid in year.

• Kopp desires a minimum cash balance of $20,000 in year.

• The ratio of accounts payable to purchases will remain the same in year 2 in year 1.

Required:

• Prepare a statement of forecasted cash inflows and outflows (what if analysis) for the year ended December 31, year 2.

• Will Kopp Corporation have to borrow money in year 2?