Sales are projected to increase by $70 million, or 20%, during 2016. Use the for
ID: 2613536 • Letter: S
Question
Sales are projected to increase by $70 million, or 20%, during 2016. Use the forecasted financial statement method to forecast Upton’s balance sheet for December 31, 2016. Assume that all additional external capital is raised as a bank loan at the end of the year and is reflected in notes payable (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 2016 as they were in 2015. What is the amount of notes payable reported on the 2016 forecasted balance sheets? (Hint: You don’t need to forecast the income statements because you are given the projected sales, profit margin, and dividend payout ratio; these figures allow you to calculate the 2016 addition to retained earnings for the balance sheet).
Explanation / Answer
Based on the revised figures of Income Statement :
Hence, amount of retained earnings added would be $ 7.56 Million.
Sales 420 Net Income@3% 12.6 Dividend Paid@40% 5.04 Amount to Retained Earnings 7.56Related Questions
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