Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Fill out the balance sheet Create pro forma financial statements from the information provided below Year 1 Sales revenues increase 3.5% Gross margin is 50%

Fill out the balance sheet

Create pro forma financial statements from the information provided below
Year 1
Sales revenues increase 3.5%
Gross margin is 50%
SG&A increases 1.2%
$2000 of PP&E is purchased on January 1,
New PP&E is depreciated over 10 years
Inventory grows in line with COGS
Assume that all other asset accounts grow in line with sales (3.5%).
Accounts Payable grow in line with COGS
Accrued and deferred income taxes grows in line with taxes.
Long-term debt declines by $200
Unless otherwise stated, liability accounts grow in line with sales (3.5%)
Treasury Stock purchases equal $300
Average interest cost of all interest bearing debt is 1.6%
Dividend payout ratio is 22%
Tax rate is 35%
Funding requirements should be financed with short-term debt
Y2
Sales revenue decline by 2.0%
Gross margin declinesto 48%
Inventory grows in line with COGS
SG&A declines by 1%
$800of PP&E is sold on January 1 for $600 cash. (Gross =$800, Accumulated depreciation = $200)
Annual depreciation expense declines by $ 80
Assume that all other asset accounts grow in line with sales. (-2.0%)
Accounts Payable grow in line with COGS
Long-term debt declines by $150
Accrued and deferred income taxes grows in line with taxes.
Unless otherwise stated, liability accounts grow in line with sales (-2.0%)
Treasury Stock purchase is $100.
Average interest cost of all interest bearing debt is 1.8%
Dividend payout ratio changes to 25%
Tax rate is 35%
Funding requirements should be financed with short-term debt
Excess cash is used to retire short-term debt
100 shares of $1 par value common stock is issued for $300.
Do not add significant amounts to cash unless Loans & notes payable is drawn down to zero.
Income Statement
Year 0 Year 1 Year 2
Revenues 17,000 17,595 17,251
Cost of goods sold 9,200 9,538 9,349
Gross profit 7,800 8,057 7,902
SG&A 4,790 4,846 4,797
Depreciation 1,700 1,700 1,620
Operating Profit 1,310 1,511 1,485
Interest expense 155 24 27
Income before taxes 1,155 1,487 1,458
Taxes @35% 404 520 510
Net Income 751 967 948
Dividends 225 213 237
Addition to retained earnings 526 754 711
Balance Sheet
Assets
Year 0 Year 1 Year 2
Cash and cash equivalents 640
Marketable securities 28
Accounts Receivables 8,200
Inventory 3,142
Prepaid expen. & other assets 1,323
Total Current Assets 13,333
Plant property and equipment (gross) 7,607
Accumulated Depreciation 3,000
PP&E (net) 4,607
Total Assets 17,940

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting Principles

Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso

10th Edition

1119491630, 978-1119491637, 978-0470534793

More Books

Students also viewed these Accounting questions