Edman Company is a merchandiser that has provided the following balance sheet and income statement for this year. Ending Balance Assets Cash Accounts receivable Inventory Property, plant & equipment (net) Other assets Total assets Liabilities & Stockholders' Equity Accounts payable Bonds payable Common stock Retained earnings Total liabilities & stockholders' equity Beginning Balance 62,800 $ 150,000 160,000 180,000 230,000 240,000 833,000 793,000 37,000 37,000 $1,322,800 $1,400,000 $ 70,000 $ 80,000 550,000 550,000 410,000 410,000 292,800 360,000 $1,322,800 $1,400,000 Sales Variable expenses: Cost of goods sold This Year $2,500,000 1,600,000 Variable selling expense 240,000 Total variable expenses 1,840,000 Contribution margin 660,000 Fixed expenses: Fixed selling expenses 220,000 Fixed administrative expenses 300,000 Total fixed expenses 520,000 Net operating income 140,000 Interest expense (8%) 44,000 Net income before tax Tax expense (30%) Net income 96,000 28,800 $ 67,200 5. To evaluate alternative 2, refer to the "Requirement 5 Financials" tab within your template. Assume the company purchases new equipment in an effort to grow sales with the following estimated impacts: . Next year's sales and variable expenses increase by 5%. Next year's fixed expenses are the same as this year. Next year's ending balances in accounts receivable, inventory, and accounts payable each increase by 5% compared to their respective beginning balances. . Next year's ending balance in property, plant, and equipment (net) increases by $110,000 compared to its beginning balance. This reflects the purchase of a $150,000 piece of equipment minus next year's depreciation expense of $40,000. Next year's ending balance in bonds payable decreases by $50,000 compared to its beginning balance. This reflects a bond issuance of $150,000 to purchase the equipment and a bond retirement of $200,000. Next year's ending balances in other assets and common stock are the same as their beginning balances. a. Based on the above estimated impacts, use Excel formulas to calculate the revised sales and variable expenses as needed in column B. (Hint: Your formulas should refer to information contained in the Requirement 1 Financials tab.) What are the revised amounts of sales and the variable expenses? b. Based on the above estimated impacts, use Excel formulas to calculate ending balances as needed in column C. What is the ending balance in the following accounts? c. Create formulas within column D that calculate next year's average balances for all balance sheet accounts (except Cash which will automatically be computed for you). What is the average balance in the following accounts? d. What is the company's estimated average total liabilities and stockholders' equity for next year? Edman Company Balance Sheets Beginning Balanced Sheet: Assets Balance Ending Balance Average Balance Cash $ 150,000 $ - $ 75,000 Accounts receivable $ 180,000 Inventory $ 240,000 Property, plant & equipment (net) $ 793,000 Other assets $ 37,000 Total assets $ 1,400,000 $ $ 75,000 Liabilities & stockholders' equity Accounts payable $ 80,000 Bonds payable $ 550,000 Common stock $ 410,000 Retained earnings $ 360,000 Total liabilities & stocholders' equity $ 1,400,000 $ Edman Company Income Statement Sales Variable expenses: Cost of goods sold Variable selling expense Total variable expenses Contribution margin Fixed expenses: Fixed selling expense 220,000 Fixed administrative expense 300,000 Total fixed expenses 520,000 Net operating income (520,000) Interest expense (8%) Net income before tax (520,000) Tax expense (30%) (156,000) Net income $ (364,000) 6. Refer to the "Requirement 6 DuPont Diagram" tab within your template. For alternative 2, complete the diagram by using appropriate formulas and reference cells. (In some instances your formulas and reference cells will refer to the Requirement 5 Financials tab.) a. Which choice shows the formulas used to compute the expenses and current assets? b. What is this alternative's estimated margin, turnover, and return on investment (ROI)? c. If the company pursues this alternative, would it cause next year's ROI to be greater than, less than, or equal to this year's ROI (as computed in Requirement 2b)? Cost of goods sold Sales Selling expense Expenses Admin expense Cash Accounts receivable Current assets Inventories Plant and equipement Noncurrent assets Other assets Net operating income Sales Sales Avg operating assets Margin X Return on investment Turnover