The balance sheet of the Thompson Trucking Company (TTC) follows: TCC has sales
ID: 2724178 • Letter: T
Question
The balance sheet of the Thompson Trucking Company (TTC) follows: TCC has sales for the year ended 12/31/2013 of 51.91 million. The firm follows a policy of paying all the earnings out to its common stockholders in cash dividends. Thus, TTC generated no funds from its earnings that can be used to exapnd its operations. ( Assume that the depreciation expense is just equal to the cost of replacing worn-out assets.) Hint make sure to round all intermediate calcualtions to at least five decimal places.
A. If TTC anticipates sales of 81.91 million during the coming year, develop a pro forma balance sheet for the firm for 12/31/2014. Assume the current assets vary as a percent of slaes, net fixed assets remain unchanges, and the accounts payable vary as a percent of sales. Use notes payable as a balancing entry.
B. How much "new" financing will TTC need next year?
C. What limitaion does the percent-of-sales forcast method suffer from?
Thompson Trucking Company Balance Sheet
December 31, 2013 ($ millions)
Thompson Trucking Company Balance Sheet
December 31, 2013 ($ millions)
Current Assets $10.31 Accounts payable $4.41 Net fixed assets 14.47 Notes payable 0 Total $24.78 Bonds payable 10.62 common equity 9.75 total $24.78Explanation / Answer
Sales increase from 51.91 million to 81.91 million
% increase in sales = (81.91-51.91) / 51.91 * 100 = 57.79233
Current assets increase to = $10.31 * 1. 5779233 = 16.26839
Account payable increase to = $4.41 * 1. 5779233 = 6.958642
Thompson Trucking Company Performa Balance Sheet
December 31, 2014 ($ millions)
Current Assets
$16.26839
Accounts payable
$6.958642
Net fixed assets
$14.47
Notes payable
$3.409748
Total
$30.73839
Bonds payable
$10.62
common equity
$9.75
Total
$30.73839
New finance needed next year = 5.958389
Thompson Trucking Company Performa Balance Sheet
December 31, 2014 ($ millions)
Current Assets
$16.26839
Accounts payable
$6.958642
Net fixed assets
$14.47
Notes payable
$3.409748
Total
$30.73839
Bonds payable
$10.62
common equity
$9.75
Total
$30.73839
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