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Analytical Assignments AA 7-45 Cumulative Spreadsheet Project Preparing New Forecasts This spreadsheet assignment is a continuation of the spreadsheet assignments given in earlier chap ters. If you completed those spreadsheets, you have a head start on this one. If needed, review the spreadsheet assignment for Chapter 4 to refresh your memory on how to construct forecasted financial statements. 1. Handyman wishes to prepare a forecasted balance sheet and income statement for 2013. Use the original financial statement numbers for 2012 (given in part (1) of the Cumula- tive Spreadsheet Project assignment in Chapter 2) as the basis for the forecast, along with the following additional information: a. Sales in 2013 are expected to increase by 40% over 2012 sales of $700. b. Cash will increase at the same rate as sales. C. The forecasted amount of accounts receivable in 2013 is determined using the fore- casted value for the average collection period. For simplicity, do the computations using the end-of-period accounts receivable balance instead of the average balance. The average collection period for 2013 is expected to be 14.08 days. d. In 2013, Handyman expects to acquire new property, plant, and equipment costing $80. e. The $160 in operating expenses reported in 2012 breaks down as follows: $5 depre- ciation expense, $155 other operating expenses. f. No new long-term debt will be acquired in 2013. & No cash dividends will be paid in 2013. h. New short-term loans payable will be acquired in an amount sufficient to make Handyman's current ratio in 2013 exactly equal to 2.0. Note: These statements were constructed as part of the spreadsheet assignment in Chapter 6. You can use that spreadsheet as a starting point if you have completed that assignment. Clearly state any additional assumptions that you make. For this exercise, add the following additional assumptions: i. The forecasted amount of inventory in 2013 is determined using the forecasted value for the number of days' sales in inventory (computed using the end-of-period inventory balance). The number of days sales in inventory for 2013 is expected to be 107.6 days. ii. The forecasted amount of accounts payable in 2013 is determined using the forecast- ed value for the number of days' purchases in accounts payable (computed using the end-of-period accounts payable balance). The number of days' purchases in accounts payable for 2013 is expected to be 48.34 days. 2. Repeat (1), with the following changes in assumptions: a. Number of days' sales in inventory is expected to be 66.2 days. b. Number of days' sales in inventory is expected to be 150.0 days. 3. Comment on the differences in the forecasted values of cash from operating activities in 2013 under each of the following assumptions about the number of days' sales in inven- tory: 107.6 days, 66.2 days, and 150.0 days. 4. Is there any impact on the forecasted level of accounts payable when the number of days' sales in inventory is changed? Why or why not? 5. What happens to the forecasted level of short-term loans payable when the number of days' sales in inventory is reduced to 66.2 days? Explain. Operating Activities 318 Part 2 Analytical Assignments AA 2.51 Cumulative Spreadsheet Project Creating a Balance Sheet and Income Statement Starting with this chapter, each chapter in this text will include a spreadsheet assignment based on the financial information of a fictitious company named Handyman. The first assignments are simple in this chapter you are asked to do little more than set up financial statement formats and input some numbers. In succeeding chapters, the spreadsheets will get more complex so that by the end of the course, you will have constructed a spreadsheet that allows you to forecast operating cash flow for five years in the future and adjust your forecast depending on the operating parameters that you think are most reasonable. So, let's get started with the first spreadsheet assignment. 1. The following numbers are for Handyman Company for 2012: Financial Statements: An Overview Chapter 2 6 5 50 31 Short-Term Loans Payable...... Long Term Debt................ $207 Interest Expense Income Tax Expense. Capital Stock Retained Earnings (as of 1/1/12). Cash 10 Receivables.. Dividends. Sales 700 Accumulated Depreciation... Accounts Payable.... 74 Inventory 153 Property. Plant, & Equipment ....... Cost of Goods Sold. ................... 519 O ther Operating Expenses.... Your assignment is to create a spreadsheet containing a balance sheet and an income statement for Handyman Company 2. Handyman is wondering what its balance sheet and income statement would have looked like if the following numbers were changed as indicated: 199 160 Change From To Sales.. $700 $730 Cost of Goods Sold. ..... 519 550 Other Operating Expenses..................... ...... . 160 160 165 Create a second spreadsheet with the numbers changed as indicated. Note: After making these changes, your balance sheet may no longer balance. Assume that any discrepancy is eliminated by increasing or decreasing Short-Term Loans Payable as much as necessary. Analytical Assignments AA 7-45 Cumulative Spreadsheet Project Preparing New Forecasts This spreadsheet assignment is a continuation of the spreadsheet assignments given in earlier chap ters. If you completed those spreadsheets, you have a head start on this one. If needed, review the spreadsheet assignment for Chapter 4 to refresh your memory on how to construct forecasted financial statements. 1. Handyman wishes to prepare a forecasted balance sheet and income statement for 2013. Use the original financial statement numbers for 2012 (given in part (1) of the Cumula- tive Spreadsheet Project assignment in Chapter 2) as the basis for the forecast, along with the following additional information: a. Sales in 2013 are expected to increase by 40% over 2012 sales of $700. b. Cash will increase at the same rate as sales. C. The forecasted amount of accounts receivable in 2013 is determined using the fore- casted value for the average collection period. For simplicity, do the computations using the end-of-period accounts receivable balance instead of the average balance. The average collection period for 2013 is expected to be 14.08 days. d. In 2013, Handyman expects to acquire new property, plant, and equipment costing $80. e. The $160 in operating expenses reported in 2012 breaks down as follows: $5 depre- ciation expense, $155 other operating expenses. f. No new long-term debt will be acquired in 2013. & No cash dividends will be paid in 2013. h. New short-term loans payable will be acquired in an amount sufficient to make Handyman's current ratio in 2013 exactly equal to 2.0. Note: These statements were constructed as part of the spreadsheet assignment in Chapter 6. You can use that spreadsheet as a starting point if you have completed that assignment. Clearly state any additional assumptions that you make. For this exercise, add the following additional assumptions: i. The forecasted amount of inventory in 2013 is determined using the forecasted value for the number of days' sales in inventory (computed using the end-of-period inventory balance). The number of days sales in inventory for 2013 is expected to be 107.6 days. ii. The forecasted amount of accounts payable in 2013 is determined using the forecast- ed value for the number of days' purchases in accounts payable (computed using the end-of-period accounts payable balance). The number of days' purchases in accounts payable for 2013 is expected to be 48.34 days. 2. Repeat (1), with the following changes in assumptions: a. Number of days' sales in inventory is expected to be 66.2 days. b. Number of days' sales in inventory is expected to be 150.0 days. 3. Comment on the differences in the forecasted values of cash from operating activities in 2013 under each of the following assumptions about the number of days' sales in inven- tory: 107.6 days, 66.2 days, and 150.0 days. 4. Is there any impact on the forecasted level of accounts payable when the number of days' sales in inventory is changed? Why or why not? 5. What happens to the forecasted level of short-term loans payable when the number of days' sales in inventory is reduced to 66.2 days? Explain. Operating Activities 318 Part 2 Analytical Assignments AA 2.51 Cumulative Spreadsheet Project Creating a Balance Sheet and Income Statement Starting with this chapter, each chapter in this text will include a spreadsheet assignment based on the financial information of a fictitious company named Handyman. The first assignments are simple in this chapter you are asked to do little more than set up financial statement formats and input some numbers. In succeeding chapters, the spreadsheets will get more complex so that by the end of the course, you will have constructed a spreadsheet that allows you to forecast operating cash flow for five years in the future and adjust your forecast depending on the operating parameters that you think are most reasonable. So, let's get started with the first spreadsheet assignment. 1. The following numbers are for Handyman Company for 2012: Financial Statements: An Overview Chapter 2 6 5 50 31 Short-Term Loans Payable...... Long Term Debt................ $207 Interest Expense Income Tax Expense. Capital Stock Retained Earnings (as of 1/1/12). Cash 10 Receivables.. Dividends. Sales 700 Accumulated Depreciation... Accounts Payable.... 74 Inventory 153 Property. Plant, & Equipment ....... Cost of Goods Sold. ................... 519 O ther Operating Expenses.... Your assignment is to create a spreadsheet containing a balance sheet and an income statement for Handyman Company 2. Handyman is wondering what its balance sheet and income statement would have looked like if the following numbers were changed as indicated: 199 160 Change From To Sales.. $700 $730 Cost of Goods Sold. ..... 519 550 Other Operating Expenses..................... ...... . 160 160 165 Create a second spreadsheet with the numbers changed as indicated. Note: After making these changes, your balance sheet may no longer balance. Assume that any discrepancy is eliminated by increasing or decreasing Short-Term Loans Payable as much as necessary
