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Problem 23-02 EMM, Inc. has the following balance sheet: EMM, Incorporated Balance Sheet as of 12/ 31/X0 Assets Liabilities and Equity Cash $ 1,080 Accounts payable $ 4,410 Accounts receivable 5,400 Bank note payable 1,930 Inventory 4,860 Long-term assets 3,900 Equity 8,900 $15,240 $15,240 a. If the rm expects sales to rise from $18,000 to $23,000, what are the forecasted levels of accounts receivable, accounts payable, and inventory? Round your answers to the nearest dollar. Accounts receivable: $ ' Inventory: $ Accounts payable: $ l' b. Will the expansion in accounts payable cover the expansion in inventory and accounts receivable? Round your answers to the nearest dollar. The expansion in accounts payable of $ ' -Select- the total expansion in inventory and accounts receivable, which is $ c. If the rm earns 12 percent on sales after taxes and retains all of these earnings, what is the rm's forecasted equity? Round your answer to the nearest dollar. $ l l d. Construct a new balance sheet that incorporates the issuing of additional short-term debt to cover any needs for additional nance. If the rm has excess funds, add them to cash. Round your answers to the nearest dollar. EMM, Incorporated Balance Sheet as of 12/31/X1 Assets Liabi ties and Equity Cash 15 l ' Accounts payable $ Accounts receivable ' ' Bank note payable Inventory ' Long-term assets ' ' Equity $ l l $ EMM, Inc. has the following balance sheet: EMM, Incorporated Balance Sheet as of 12/31/X0 Assets Liabilities and Equity Cash $ 1,000 Accounts payable $ 5,300 Accounts receivable 6,000 Bank note payable 2,000 Inventory 5,900 Long-term assets 4,400 Equity 10,000 $17,300 $17,300 It has estimated the following relationships between sales and the various assets and liabilities that vary with the level of sales: Accounts receivable=$3,305 + 0.40 Sales, Inventory=$2,382 + 0.24 Sales, Accounts payable=$1,141 + 0.22 Sales. a. If the rm expects sales of $26,000, what are the forecasted levels of the balance sheet items above? Round your answers to the nearest dollar: Accounts receivable: $ Inventory: $ 3 l Accounts payable: $ ': b. Will the expansion in accounts payable cover the expansion in inventory and accounts receivable? Round your answers to the nearest dollar. The expansion in accounts payable of $ l -Select- the total expansion in inventory and accounts receivable, which is $ c. If the rm earns 13 percent on sales after taxes and retains all of these earnings, what is the forecasted equity? Round your answer to the nearest dollar. $ d. Construct a new balance sheet that incorporates the issuing of additional short-term debt to cover any needs for additional nance. If the rm has excess funds, add them to cash. Round your answers to the nearest dollar. EMM, Incorporated Balance Sheet as of 12/31/X1 Assets Liabilities and Equity Cash $ Accounts payable $ l l Accounts receivable Bank note payable ' ' Inventory Long-term assets Equity l l $ l l 4. Problem 23-04 Problem 23-04 BBP, Inc., with sales of $500,000, has the following balance sheet: BBP, Incorporated Balance Sheet as of 12/31/X0 Assets Liabilities and Equity Cash $ 25,000 Accounts payable $ 15,000 Accounts receivable 45,000 Accruals 20,000 Inventory 60,000 Notes payable 35,000 Current assets 130,000 Current liabilities 70,000 Fixed assets 195,000 Common stock 120,000 Retained earnings 135,000 Total assets $325,000 Total liabilities and equity $325,000 The rm earns 13 percent on sales and distributes 20 percent of its earnings. Using the percent of sales, determine whether the rm will need external funds and forecast the new balance sheet for sales of $650,000 assuming that cash changes with sales and that the firm is not operating at capacity. Use newly issued short-term debt to cover any needs for additional nance. If the rm has excess funds, add them to cash. Round your answers to the nearest dollar. Enter your answers as positive values. The rm -Se|ect- funds of $ . BBP, Incorporated Balance Sheet as of 12/31/X1 Assets Liabilities and Equity Cash $ Accounts payable $ Would your answers be different if the firm distributed all of its earnings? Round your answers to the nearest dollar. Enter your answer as a positive value. Accounts receivable Inventory Current assets Fixed assets Total assets $ Accruals Notes payable Current liabilities Common stock Retained earnings Total liabilities and equity $ If management distributed all the rm's earnings, it -e|ect: funds of $ With sales of $450,000, MJM, Inc. is operating at capacity but management anticipates that sales will grow 25 percent during the coming year. The company earns 8 percent on sales and distributes 40 percent of earnings to stockholders. Its current balance sheet is as follows: MJM, Incorporated Balance Sheet as of 12/31/X0 Assets Liabilities and Equity Cash $ 8,500 Accounts payable $ 42,000 Accounts receivable 22,000 Accruals 39,000 Inventory 75,000 Notes payable 0 Current assets 105,500 Current liabilities 81,000 Plant and equipment 100,000 Common stock 80,000 Retained earnings 44,500 Total assets $205,500 Total liabilities and equity $205,500 a. In addition to cash, which assets and liabilities will increase with the increase in sales and by how much if the percent of sales is used to forecast the increases? If assets or liabilities does not change enter zero as a forecasted change. Do not round intermediate calculations. Round your answers to the nearest dollar. Assets and Liabilities Change Forecasted change Cash -5elect- $ Accounts receivable -Select- $ Inventory -Select- a $ Plant and equipment -Select $ Accounts payable -Se|ect- $ Accruals sam $ Notes payable -Select- a $ b. How much external nance will the firm need? Round your answer to the nearest dollar. $ c. If cash did not increase but could be maintained at $8,500, what impact would the lower cash have on the rm's need for external nance? Round your answer to the nearest dollar. Enter your answer as a positive value. If cash remained at $8,500 the need for external funds would be -Select- by $ l l . d. If the rm distributed 20 percent (2) instead of 40 percent (1) of its earnings, would it need external nance? The net increase in retained earnings comparing (2) with (1) is $ . It -Select- a cover the external funds needed. e. Construct a new balance sheet assuming that cash increases with the increase in sales and the rm distributes 40 percent of its earnings to stockholders. If the firm needs external nance, acquire the funds by issuing a short-term note to a commercial bank. Do not round intermediate calculations. Round your answers to the nearest dollar. a. In addition to cash, which assets and liabilities will increase with the increase in sales and by how much if the percent of sales is used to forecast the increases? If assets or liabilities does not change enter zero as a forecasted change. Do not round intermediate calculations. Round your answers to the nearest dollar. Assets and Liabilities Change Forecasted change Cash -Select- a $ Accounts receivable -Select- 3 $ Inventory -Select $ Plant and equipment -Select- $ Accounts payable -Select- a $ Accruals -Select- a $ Notes payable -Select $ b. How much external nance will the firm need? Round your answer to the nearest dollar. $ c. If cash did not increase but could be maintained at $8,500, what impact would the lower cash have on the rm's need for external nance? Round your answer to the nearest dollar. Enter your answer as a positive value. If cash remained at $8,500 the need for external funds would be Select a by $ l 7 N 7 l . d. If the rm distributed 20 percent (2) instead of 40 percent (1) of its earnings, would it need external nance? The net increase in retained earnings comparing (2) with (1) is $ . It -Select cover the external funds needed. e. Construct a new balance sheet assuming that cash increases with the increase in sales and the rm distributes 40 percent of its earnings to stockholders. If the firm needs external nance, acquire the funds by issuing a shortterm note to a commercial bank. Do not round intermediate calculations. Round your answers to the nearest dollar. MJM, Incorporated Balance Sheet as of 12/31/X1 Assets Liabilities and Equity Cash $ Accounts payable 2; Accounts receivable Accruals Inventory Notes payable Current assets Current liabilities Plant and equipment Common stock Retained earnings Total assets $ Total liabilities and equity :1; Problem 23-06 HBM, Inc. had sales of $10 million and a net prot margin of 10 percent in 20X0. Management expects sales to grow to $11.5 million and $13 million in 20X1 and 20X2, respectively. Management wants to know if additional funds will be necessary to nance this anticipated growth. Currently, the rm is not operating at full capacity and should be able to sustain a 20 percent increase in sales. However, further increases in sales will require $3 million in plant and equipment for every $5 million increase in sales. (Note that even if sales increase by less than $5 million, the total amount of $3 million investment in plant and equipment is still required.) The firm's balance sheet is as follows: HBM, Incorporated Balance Sheet as of 12/31/X0 Assets Cash $2,200,000 Accounts receivable 2,700,000 Inventory 1,500,000 Plant and equipment 2,000,000 $8,400,000 Liabilities and Equity Accruals $2,500,000 Accounts payable 2,000,000 Notes payable 400,000 Longterm debt 2,000,000 Equity 1,500,000 $8,400,000 Management has followed a policy of distributing at least 80 percent of earnings as dividends. Management believes that the percent of sales method of forecasting is sufcient to answer the question, "Will outside funding be necessary?" To use this technique, management has assumed that accounts receivable, inventory, accruals, and accounts payable will vary with the level of sales. Cash will not change. a. Prepare projected balance sheets for 20X1 and 20X2 that incorporate any necessary outside nancing. Any short-term funds that are required should be obtained through a loan from the bank, and any excess short-term funds should be appropriately invested. Any long-term nancing that is needed should be obtained through longterm debt. Round your answers to the nearest dollar. HBM, Incorporated Balance Sheet as of 12/31/X1 Assets Cash $ Marketable securities Accounts receivable l l l Inventory ' Plant and equipment ' l Liabilities and Equity Accruals $ Accounts payable Notes payable Longterm debt Equity HBM, Incorporated Balance Sheet as of 12/31/X2 Assets Liabilities and Equity Cash $ Accruals $ Marketable securities Accounts payable Accounts receivable Notes payable Inventory Long-term debt Plant and equipment Equity $ $ b. If the firm did not distribute 80 percent of its earnings, could it sustain the expansion without issuing additional long-term debt? Round your answer to the nearest dollar. If the firm did not distribute 80 percent of its earnings, the maximum possible retained earnings would be $ . A change in the dividend policy -Select- cover the expansion in plant and equipment. c. If the firm's creditors in part a require a current ratio of 2.2:1, would that affect the firm's financing in 20X1 and 20X2? If so, what additional actions could the firm take? Round your answers to two decimal places. According to the forecast in part a, the current ratios in 20X1 and 20X2 are :1 and :1, respectively. If the firm's creditors require a current ratio of 2.2:1, the firm -Select- meet the current ratio requirement and -Select- take additional actions to low current ratio. d. If the percent of sales forecasts are replaced with the following regression equations: Accounts receivable=$150,000 + 0.16 Sales, Inventory=$220,000 + 0.09 Sales, Accruals=$100,000 + 0.07 Sales, Accounts payable=$220,000 + 0.08 Sales, what is the firm's need for outside funding (if any) in 20X1 and 20X2? Round your answers to the nearest dollar. Enter your answers as positive values. In 20X1 the firm -Select- funds of $ In 20X2 the firm -Select- funds of $ e. If the firm's creditors in part d required a current ratio of 2.2:1, would that affect the firm's financing in 20X1 and 20X2? If so, what additional actions could the firm take? Round your answers to the nearest dollar. If the firm's creditors in part d required a current ratio of 2.2:1, the maximum amount of current liabilities in 20X1 is $ The forecast indicates that the firm -Select- meet the current ratio requirement. If the firm's creditors in part d required a current ratio of 2.2:1, the maximum amount of current liabilities in 20X2 is $ The forecast indicates that the firm -Select- meet the current ratio requirement.Problem 23-02 EMM, Inc. has the following balance sheet: EMM, Incorporated Balance Sheet as of 12/31/X0 Assets Liabilities and Equity Cash $ 1,080 Accounts payable $ 4,410 Accounts receivable 5,400 Bank note payable 1,930 Inventory 4,860 Long-term assets 3,900 Equity 8,900 $15,240 $15,240 a. If the rm expects sales to rise from $18,000 to $23,000, what are the forecasted levels of accounts receivable, accounts payable, and inventory? Round your answers to the nearest dollar. Accounts receivable: $ ' Inventory: $ l ' Accounts payable: $ ' b. Will the expansion in accounts payable cover the expansion in inventory and accounts receivable? Round your answers to the nearest dollar. The expansion in accounts payable of 3; -Select- the total expansion in inventory and accounts receivable, which is $ c. If the rm earns 12 percent on sales after taxes and retains all of these earnings, what is the rm's forecasted equity? Round your answer to the nearest dollar. $ d. Construct a new balance sheet that incorporates the issuing of additional short-term debt to cover any needs for additional nance. If the rm has excess funds, add them to cash. Round your answers to the nearest dollar. EMM, Incorporated Balance Sheet as of 12/31/X1 Assets Liabilities and Equity Cash $ Accounts payable $ l Accounts receivable Bank note payable ' Equky ' $ l l l Inventory ' Long-term assets ' l EMM, Inc. has the following balance sheet: EMM, Incorporated Balance Sheet as of 12/31/xo Assets Liabi ties and Equity Cash $ 1,000 Accounts payable $ 5,300 Accounts receivable 6,000 Bank note payable 2,000 Inventory 5,900 Long-term assets 4,400 Equity 10,000 $17,300 $17,300 It has estimated the following relationships between sales and the various assets and liabilities that vary with the level of sales: Accounts receivable=$3,305 + 0.40 Sales, Inventory=$2,382 + 0.24 Sales, Accounts payable=$1,141 + 0.22 Sales. a. If the rm expects sales of $26,000, what are the forecasted levels of the balance sheet items above? Round your answers to the nearest dollar: Accounts receivable: 35 l l Inventory: $ ' l Accounts payable: $ ' N V l b. Will the expansion in accounts payable cover the expansion in inventory and accounts receivable? Round your answers to the nearest dollar. The expansion in accounts payable of $ l l -Select- 3 the total expansion in inventory and accounts receivable, which is $ c. If the rm earns 13 percent on sales after taxes and retains all of these earnings, what is the forecasted equity? Round your answer to the nearest dollar. $ d. Construct a new balance sheet that incorporates the issuing of additional short-term debt to cover any needs for additional nance. If the rm has excess funds, add them to cash. Round your answers to the nearest dollar. EMM, Incorporated Balance Sheet as of 12/31/X1 Assets Liabilities and Equity Cash $ l 7 7 7 ' Accounts payable $ l 7 ' Accounts receivable ' Bank note payable ' 1 Inventory ' ' Long-term assets l l Equity l $l $l 4. Problem 23-04 Problem 23-04 BBP, Inc., with sales of $500,000, has the following balance sheet: BBP, Incorporated Balance Sheet as of 12/31/X0 Asses Liabilities and Equity Cash $ 25,000 Accounts payable $ 15,000 Accounts receivable 45,000 Accruals 20,000 Inventory 60,000 Notes payable 35,000 Current assets 130,000 Current liabilities 70,000 Fixed assets 195,000 Common stock 120,000 Retained earnings 135,000 Total assets $325,000 Total liabilities and equity $325,000 The rm earns 13 percent on sales and distributes 20 percent of its earnings. Using the percent of sales, determine whether the rm will need external funds and forecast the new balance sheet for sales of $650,000 assuming that cash changes with sales and that the rm is not operating at capacity. Use newly issued short-term debt to cover any needs for additional nance. If the rm has excess funds, add them to cash. Round your answers to the nearest dollar. Enter your answers as positive values. The rm -Select a funds of $ BBP, Incorporated Balance Sheet as of 12/31/X1 Assets Liabilities and Equity Cash $ Accounts payable :1; Accounts receivable Accruals Inventory Notes payable Current assets Fixed assets Total assets $ Current liabilities Common stock Retained earnings Total liabilities and equity $ Would your answers be different if the firm distributed all of its earnings? Round your answers to the nearest dollar. Enter your answer as a positive value. If management distributed all the rm's earnings, it -Select- funds of $