Question
Upton Computers makes bulk purchases of small computers, stocks them in conveniently located warehouses, ships them to its chain of retail stores, and has a
Upton Computers makes bulk purchases of small computers, stocks them in conveniently located warehouses, ships them to its chain of retail stores, and has a staff to advise customers and help them set up their new computers. Upton's balance sheet as of December 31, 2019, is shown here (millions of dollars):
Cash | $ 3.5 | Accounts payable | $ 9.0 | |
Receivables | 26.0 | Notes payable | 18.0 | |
Inventories | 58.0 | Line of credit | 0 | |
Total current assets | $ 87.5 | Accruals | 8.5 | |
Net fixed assets | 35.0 | Total current liabilities | $ 35.5 | |
Mortgage loan | 6.0 | |||
Common stock | 15.0 | |||
Retained earnings | 66.0 | |||
Total assets | $122.5 | Total liabilities and equity | $122.5 |
Use the forecasted financial statement method to forecast Upton's balance sheet for December 31, 2020. Assume that all additional external capital is raised as a line of credit at the end of the year and is reflected (because the debt is added at the end of the year, there will be no additional interest expense due to the new debt). Assume Upton's profit margin and dividend payout ratio will be the same in 2020 as they were in 2019. What is the amount of the line of credit reported on the 2020 forecasted balance sheets? (Hint: You don't need to forecast the income statements because the line of credit is taken out on the last day of the year and you are given the projected sales, profit margin, and dividend payout ratio; these figures allow you to calculate the 2020 addition to retained earnings for the balance sheet without actually constructing a full income statement.) Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55. Round your answers to two decimal places.
Upton Computers Pro Forma Balance Sheet December 31, 2020 (Millions of Dollars) | ||
Cash | $ | |
Receivables | $ | |
Inventories | $ | |
Total current assets | $ | |
Net fixed assets | $ | |
Total assets | $ | |
Accounts payable | $ | |
Notes payable | $ | |
Line of credit | $ | |
Accruals | $ | |
Total current liabilities | $ | |
Mortgage loan | $ | |
Common stock | $ | |
Retained earnings | $ | |
Total liabilities and equity | $ |
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