Two-Year-Ahead Forecasting of Financial Statements Following are the financial s
ID: 2499873 • Letter: T
Question
Two-Year-Ahead Forecasting of Financial Statements
Following are the financial statements of Target Corp.
Forecast Target's fiscal year ended 2012 and 2013 income statements. Use the same forecasting assumptions for both years.
Assume no change for net interest expense.
We forecast Target's financials using the following forecast assumptions for both years:
* Note the distinction between sales and credit card revenues.
Instructions: Round answers to the nearest whole number. Do notuse negative signs with answers. Remember to use rounded forecasted sales with subsequent calculations.
NOTE: Do not adjust net interest expense after "plug" is computed in forecasted balance sheet below. Assume net interest expense will not change.
Forecast Target's fiscal year ended 2012 and 2013 balance sheets. Use the same forecasting assumptions for both years.
Assume no change for: nonrecourse debt collateralized by credit card receivables (current and noncurrent), deferred income tax liability, common stock, additional paid-in-capital, and accumulated other comprehensive income.
We forecast Target's financials using the following forecast assumptions for both years:
Instructions: Round answers to the nearest whole number. Do notuse negative signs with answers. Remember to use rounded forecasted sales with subsequent calculations.
Consolidated Statements of Operations For fiscal year ended (millions) Jan. 29, 2011 Jan. 30, 2010 Sales $65,786 $63,435 Credit card revenues 1,604 1,922 Total revenues 67,390 65,357 Cost of sales 45,725 44,062 Selling, general and administrative expenses 13,469 13,078 Credit card expenses 860 1,521 Depreciation and amortization 2,084 2,023 Earnings before interest expense and income taxes 5,252 4,673 Net interest expense Nonrecourse debt collateralized by credit card receivables 83 97 Other interest expense 677 707 Interest income (3) (3) Net interest expense 757 801 Earnings before income taxes 4,495 3,872 Provision for income taxes 1,575 1,384 Net earnings $2,920 $2,488Explanation / Answer
Answer for forecasted income statement:
Consolidated forecasted balancesheet:
Working notes:
For depreciation it is mentioned that capital expenditure is going to increase by 3.2% of sales. Therefore PPE cost for 2012 and 2013 would be as follows:
For long term and current portion of long term debt:
Calculation of retained earnings:
Plug is calculated as follows:
Consolidated Statements of Operations For fiscal year ended (millions) Jan. 29, 2011 2012 Est. 2013 Est. Sales 65786 68417 71154 Credit card revenues 1604 1668 1735 Total revenues (A) 67390 70085 72889 Cost of sales (b) 45725 48709 50658 Selling, general and administrative expenses (C ) 13469 14025 14587 Credit card expenses (D) 860 894 930 Depreciation and amortization (E ) 2084 2149 2276 Earnings before interest expense and income taxes F= A-B-C-D-E 5252 4308 4566 Net interest expense Nonrecourse debt collaterized by credit card receivables (G) 83 83 83 Other interest expense (H) 677 677 677 Interest income (I) 3 3 3 Net interest expense J=G+H-I 757 757 757 Earnings before income taxes K=F-J 4495 3551 3809 Provisions for income taxes L=K*35% 1575 1243 1333 Net earnings M=K-L 2920 2308 2476Related Questions
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