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Question: It is January 1st, 2015. 2014 turned out very well for Oscar – his projections were quite close. ...
It is January 1st, 2015. 2014 turned out very well for Oscar – his projections were quite close. He wants you to project out an Income Statement, Balance Sheet and a Cash Flow Statement for 2015 using the new assumptions outlined below. (40 points)
-2015 year sales will each be 25% higher than the $110,000 realized in 2014
-Gross margins in 2015 will be 55, 5% higher than the 50% realized in 2014
-Operating margins will be 22%, 2% higher than 20% realized in 2014
-Accounts Receivables will be 12% of sales, lower than the 15% seen in 2014
-Inventory will be 15% of sales, higher than the 12% seen in 2014
-Accounts Payable will be 4% of sales in 2015, lower than the 5% seen in 2014
-Accrued expenses payable will be 4% of sales in 2015, lower than the 7% seen in 2014
-The Bank of Connecticut will continue to be paid 8% interest on the $30,000 worth of loans.
-The combined federal and provincial tax rates will be 30%
-No new capital purchases are made
-Closing cash is expected to remain at the same level predicted for and seen in 2014
-Depreciation of existing capital equipment continues at the same rate observed in 2014 (it is 10%)
Income Statement Sales 100,000 Less:COGS 50000 =100000*50% Gross Profit 50000 =100000*50% Less:Operating Expenses 30,000 balancing figure =50000-20000 Operating Profit 20,000 =100000*20% Less: Interest 2,400 =30000*8% Profit before tax 17,600 Less: Taxes@30% 5,280 =17600*30% Profit after tax 12,320 Balance Sheet Capital Equipment 35000 Equity Financing 28,680 =83000-5000-7000-30000-12320 Less:Accumulated depreciation 3500 =35000*10% 31500 Retained Earning 12,320 Accounts Receiavable 15,000 =100000*15% Accounts Payable 5,000 =100000*5% Inventory 12,000 =100000*12% Accrued Expenses Payable 7,000 =100000*7% Cash 24500 Bank Loan 30000 Total 83000 54320Explanation / Answer
89000
Retained Earnings = $13720 + $19495 = $33215
Projected Income Statement For 2015 Sales $137,500 Cost of goods sold $61,875 (137500*45%) Gross Profit $75,625 (137500*55%) Operating Expenses $45,375 Balancing figure (75625-30250) Operating Profit $30,250 (137500 x 22%) Interest $2,400 Profit before tax $27,850 Tax @ 30% $8,355 (27850 x 30%) Net Profit $19,495 Projected Balance Sheet as of December 31, 2015 Capital Equipment $35,000 Equity Financing $15,410 Less: Accumulated depreciation $7,000 Retained Earnings $33,215 $28,000 $48,625 Accounts Receivable $16,500 Accounts payable $5,500 Inventory $20,625 Accrued expenses payable $5,500 Cash $24,500 Bank loan $30,000 Total $89,625 $89,625 It is assumed that Oscar withdrawn an amount of $16670 from equity financing Cash Flow Projection Net income $19,495 Add: Depreciation $3,500 Increase in Inventory ($4,125) Decrease in accrued expenses payable ($2,200) Cash flow from operating activites $16,670 Cash from financing activities Cash withdrawn from business ($16,670) Net cash flow for the period $0 Beginning Cash balance $24,500 Ending Cash Balance $24,500Related Questions
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