Problem 4-6

Larime Corp. is forecasting 20X2 near the end of 20X1. The estimated year-end financial statements and a worksheet for the forecast are given below.

Management expects the following next year.

• An 7% increase in revenue.
• Price cutting will cause the cost ratio (COGS/sales) to deteriorate (increase) by 1% (of sales) from its current level.
• Expenses will increase at a rate that is three quarters of that of sales.
• The current accounts will increase proportionately with sales.
• Net fixed assets will increase by $6 million.
• All interest will be paid at 12%.
• Federal and state income taxes will be paid at a combined rate of 43%.

Make a forecast of Larime's complete income statement and balance sheet. Enter your dollar answers in thousands. For example, an answer of $12 thousands should be entered as 12, not 12,000. Round percentage values to 1 decimal place. Enter all amounts as a positive numbers.

20X1 20X2 $ % $ % Revenue $255,746 100.0 $ 273,648 100.0 COGS 147,546 57.7 160,631 58.7 Gross Margin $ 108,200 42.3 $ 113,017 41.3 Expenses 45,784 17.9 48,188 17.6 EBIT $62,416 24.4 $ 64,829 23.7 Interest (12%) 9,577 3.7 9,270 X 3.2 EBT $52,839 20.7 $ 63,777 X 20.7 Inc Tax (43%) 22,721 8.9 23,758 X 8.9 Net Income $30,118 11.8 $ 31,494 X 11.8 Larime Corp. Projected Balance Sheet ($000) ASSETS LIABILITIES & EQUITY 20X1 20X2 20X1 20x2 $ 178,940 $ 191,466 C/L $83,487 $ 89,331 C/A F/A 140,648 146,648 Debt 79,450 79,450 X Total $319,588 $ 338,114 Equity 156,651 157,651 X Total $319,588 $ 338,114