Sutton Inc's underlying economic reality is a perfectly stable business that began in Year 0 (see excel Drill 5 Accruals.xlsx 2). Every year, they generate $500,000 in sales, half of which are in cash, the other half are credit sales that are collected the following year. All other items of revenue and expense (including tax expense) are identical each year (see Years 1 and 2 in excel). However, you noticed that they accelerated some revenue into Year 3 (remember: they can't accelerate cash collection) Forecast Year 4's: 1. Earnings per share (rounded to the nearest penny) 2. Return on assets (rounded to 2 decimal places. For example, enter.28176 as 28.18). (Guidance: it might be helpful to prepare the statement of cash flows and remember to adjust assets as necessary) Question 1 Forecasted EPS for Year 4 equals: Question 2 Forecasted ROA for Year 4 equals: 1 Summary Financial Statements 00 Year 4 UN 9 Cash 10 Accounts Receivable 11 Inventory 12 PP&E 13 Accumulated Depreciation 14 Total Assets Year o Year 1 700,000 589,000 250,000 400,000. 400,000 800,000 800,000 (40,000) 1,900,000 1,999,000 Year 2 728,000 250,000 400,000 800,000 (80,000) 2,098,000 Year 3 867,000 325,000 400,000 800,000 (120,000) 2,272,000 15 16 Accounts Payable 17 Notes Payable 18 Common Stock 19 Additional Paid-in Capital 20 Retained Earnings Total L&E 150,000 750,000 250,000 750,000 150,000 750,000 250,000 750,000 99,000 1,999,000 750,000 250,000 750,000 198,000 2,098,000 150,000 750,000 250,000 750,000 372,000 2,272,000 1,900,000 23 Revenue Cost of Goods Sold Operating Expenses Operating Income 27 Interest Expense 28 Income Tax Expense 29 Net Income 500,000 (220,000) (100,000) 180,000 (30,000) (51,000) 99,000 500,000 (220,000) (100,000) 180,000 (30,000) (51,000) 99,000 575,000 (220,000) (100,000) 255,000 (30,000) (51,000) 174,000 $ $ $ 3.96 5.08% 3.96 4.83% 6.96 7.96%