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INSTRUCTIONS: Using the data provided, along with the information below, prepare the 2016 Projected Income Statement, Balance Sheet and the 2016 Statement of Cash Flows for Walnut Grove. Additional information:

1. Sales of material & supplies increase 10%

2. Small tool sales increase 3%

3. The tool rental division begins tool rental in June at an average rate of $100 per week. The rental division will rent 20 tools per week for the next 15 weeks.

4. Vendor compensation will increase based on total sales increase.

5. The custom cabinet sales division begins operations in 2016. The selling price per cabinet averages $750. In 2016 Walnut Grove will sell 550 cabinets.

6. Direct materials are $150 per unit. The labor rate is $20/hour and it takes 5 hours to complete the cabinet. Factory overhead is calculated at 75% of direct labor.

7. Costs of sales for materials and supplies should increase proportionately based on its current percentage of sales. (HINT: you will need to use vertical analysis)

8. Cost of sales for Small tools will increase 5%.

9. Small tool blades and other items, which will be expensed, will total $2,500 this year.

10.Office supplies and postage will triple during 2016.

11.On July 1st, the company will invest $500,000 in new equipment for its custom cabinet division. This equipment will have a 7 year life and should be depreciated using the straight-line method.

12.The company will finance the equipment purchase with a 5 year note at 2% interest.

13.The building will continue to be depreciated over a 20 year period.

14.Because of the new cabinet division, Insurance costs will go up annually by $25,000, effective January1. The company prepaid for 2 years of this insurance and received a 5% discount for the 2 year prepayment.

15. On January 1, a new cabinet division manager will be hired at a cost of $40,000. Payroll Taxes should be calculated at 15% of wages.

16. In additional to the new cabinet division manager, 2 new employees will be hired at an average wage of $20 per hour, employees work an average of 40 hours per week. All additional expenses for the employees should be added.

17. With 43 weeks remaining in the year, 2 additional employees will be hired based on the same wage rate and hours per week quote in 11.

18. With 24 weeks remaining in the year, 2 additional employees will be hired at a rate of $18/hr based on 200an average of 40 hours per week.

19. The income tax rate is 35%.

20. At the end of the year Walnut Grove has $15,980 in ending inventory.

21. Purchases are made evenly throughout the year and are paid in full in the month following purchase.

22. Sales are collected in full the month following the sale. During the month of December 2016 sales totaled $72,050.

23. The sales tax rate is 5%.

24. At the end of the year Walnut Grove has received full payment for 20 custom cabinet orders that will be completed in January.

Revenues

Custom Cabinet Sales*

Material & Supplies Sales 258,525

Small Tool Sales 8,790

Tool Rentals

Vendor Compensation 401

Total Revenue 267,716

Cost of Goods Sold

Custom Cabinet Materials Material & Supplies 83,115

Small Tools 12,689

Wages 16,848

Total Cost of Goods Sold 112,652

Gross Profit 155,064

Expenses

Depreciation Expense^ 5,419

Insurance Expense 4,050

Office Supplies Expense 119

Payroll Tax Expense 1,289

Postage Expense 48

Small Tool Expense - Total Expenses 10,925

Net Income 144,139

*All sales were to outside companies during 2015. ^Because they are using the accrual basis, and because they are showing a net income, Walnut Grove has chosen to use Section 179 depreciation. This allows them to fully depreciate the computers and furniture & fixtures in the first year. The building is depreciated using straight line depreciation over 39 years.

For the Three Months Ended December 31, 2015 Walnut Grove Statement of Operations (Accrual Basis)

Current Assets

Cash 277,432.00

Accounts Receivable 23,712.00

Inventory 19,845.00

Prepaid Expenses 1,350.00

Total Current Assets 322,339.00

Property, Plant & Equipment

Building 120,000.00

Computers & Software 975.00

Furniture & Fixtures 3,675.00

Land 50,000.00

Machinery & Equipment

Accumulated Depreciation (5,419.00)

Total Property, Plant, & Equipment 169,231.00

Other Assets

Total Other Assets -

Total Assets 491,570.00

Current Liabilities

Accounts Payable 13,090.00

Payroll Tax Payable 4,659.00

Sales Tax Payable 2,682.00

Unearned Revenue -

Total Current Liabilities 20,431.00

Long Term Liabilities

Line of Credit 325,000.00

Notes Payable

Total Long Term Liabilities 325,000.00

Owners' Capital

Peters, J., Capital 1,000.00

Peters, M., Capital 1,000.00

Net Income/Retained Earnings 144,139.00

Total Owners' Capital 146,139.00

Total Liabilities & Capital 491,570.00

Liabilities & Owners' Capital For the Year Ended December 31, 2015 Assets Walnut Grove Statement of Financial Position (Accrual Basis)

Cash Flows from Operating Activities

Net Income 144,139

Add(deduct) noncash effects on operating income

Depreciation expense 5,419

Increase in accounts receivable (23,712)

Increase in inventory (19,845)

Increase in prepaid expenses (1,350)

Increase in accounts payable 13,090

Increase in payroll tax payable 4,659

Increase in sales tax payable 2,682

Increase in unearned revenue - (19,057)

Net cash provided by operating activities 125,082

Cash Flows from Investing Activities

Purchase of building (120,000)

Purchase of computers and software (975)

Purchase of furniture and fixtures (3,675)

Purchase of land (50,000)

Purchase of machinery and equipment - Net cash used by investing activities (174,650)

Cash Flows from Financing Activities

Proceeds from line of credit 325,000

Proceeds from owners' investments 2,000

Net cash provided by owners' investments 327,000

Net Increase in Cash 277,432

Cash Balance at March 1, 2015 -

Cash Balance at December 31, 2015 277,432

For the Three Months Ended December 31, 2015 Walnut Grove Statement of Cash Flows (Indirect Approach)