Financing Deficit Garlington Technologies Inc.\'s 2013 financial statements are
ID: 2717758 • Letter: F
Question
Financing Deficit
Garlington Technologies Inc.'s 2013 financial statements are shown below:
Balance Sheet as of December 31, 2013
Income Statement for December 31, 2013
Suppose that in 2014 sales increase by 15% over 2013 sales and that 2014 dividends will increase to $140,000. Forecast the financial statements using the forecasted financial statement method. Assume the firm operated at full capacity in 2013. Use an interest rate of 10%, and assume that any new debt will be added at the end of the year (so forecast the interest expense based on the debt balance at the beginning of the year). Cash does not earn any interest income. Assume that the AFN will be in the of form of a line of credit. Round your answers to the nearest dollar. Do not round intermediate calculations.
Financing Deficit
Garlington Technologies Inc.'s 2013 financial statements are shown below:
Balance Sheet as of December 31, 2013
Cash $ 180,000 Accounts payable $ 360,000 Receivables 360,000 Notes payable 156,000 Inventories 720,000 Line of credit 0 Total current assets $1,260,000 Accruals 180,000 Fixed assets 1,440,000 Total current liabilities $ 696,000 Common stock 1,800,000 Retained earnings 204,000 Total assets $2,700,000 Total liabilities and equity $2,700,000Income Statement for December 31, 2013
Sales $3,600,000 Operating costs 3,279,720 EBIT $ 320,280 Interest 18,280 Pre-tax earnings $ 302,000 Taxes (40%) 120,800 Net income 181,200 Dividends $ 108,000Suppose that in 2014 sales increase by 15% over 2013 sales and that 2014 dividends will increase to $140,000. Forecast the financial statements using the forecasted financial statement method. Assume the firm operated at full capacity in 2013. Use an interest rate of 10%, and assume that any new debt will be added at the end of the year (so forecast the interest expense based on the debt balance at the beginning of the year). Cash does not earn any interest income. Assume that the AFN will be in the of form of a line of credit. Round your answers to the nearest dollar. Do not round intermediate calculations.
Garlington Technologies Inc.Pro Forma Income Statement
December 31, 2014 Sales $ ________ Operating costs $ ________ EBIT $ ________ Interest $ ________ Pre-tax earnings $ ________ Taxes (40%) $ ________ Net income $ ________ Dividends: $ ________ Addition to RE: $ ________ Garlington Technologies Inc.
Pro Forma Balance Statement
December 31, 2014 Cash $ ________ Receivables $ ________ Inventories $ ________ Total current assets $ ________ Fixed assets $ ________ Total assets $ ________ Accounts payable $ ________ Notes payable $ ________ Accruals $ ________ Total current liabilities $ ________ Common stock $ ________ Retained earnings $ ________ Total liabilities and equity $ ________
Explanation / Answer
Ans-
Garlington Technologies Inc.Pro Forma Income Statement
December 31, 2014 $ Sales (3600000*115% 4140000 Operating costs (3279720*115%) 3771678 EBIT 368322 Interest 18280 Pre-tax earnings 350042 Taxes (40%) -40.00% 140017 Net income 210025 Dividends: 140000 Addition to RE: 70025 Garlington Technologies Inc. Pro Forma Balance Statement 31-Dec-14 $ Cash (180000+70025) 250025 Receivables 360000 Inventories 720000 Total current assets 1330025 Fixed assets 1440000 Total assets 2770025 Accounts payable 360000 Notes payable 156000 Accruals 180000 Total current liabilities 696000 Common stock 1800000 Retained earnings (204000+70025) 274025 Total liabilities and equity 2770025
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