The balance sheet of the Thompson Trucking Company (TTC) follows:TTC had sales f
ID: 2744460 • Letter: T
Question
The balance sheet of the Thompson Trucking Company (TTC) follows:TTC had sales for the year ended 12/31/13 of $49.95 million. The firm follows a policy of paying all net earnings out to its common stockholders in cash dividends. Thus, TTC generates no funds from its earnings that can be used to expand its operations. (Assume that depreciation expense is just equal to the cost of replacing worn-out assets.). Hint: Make sure to round all intermediate calculations to at least five decimal places.
a.If TTC anticipates sales of $79.61 million during the coming year, develop a pro forma balance sheet for the firm for 12/31/14. Assume that current assets vary as a percent of sales, net fixed assets remain unchanged, and 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 limitation does the percent-of-sales forecast method suffer from? Discuss briefly
If TTC anticipates sales of $79.61 million during the coming year, develop a pro forma balance sheet for the firm for 12/31/14. Assume that current assets vary as a percent of sales, net fixed assets remain unchanged, and accounts payable vary as a percent of sales. Use notes payable as a balancing entry.(Round to the nearest dollar.)
Thompson Trucking Company
Pro Forma Balance Sheet as of 12/31/14
Current assets
$
Net fixed assets
Total assets
$
Accounts payable
Notes payable
Bonds payable
Common equity
Total liabilities and common equity
$
Thompson Trucking Company
Pro Forma Balance Sheet as of 12/31/14
Current assets
$
Net fixed assets
Total assets
$
Accounts payable
Notes payable
Bonds payable
Common equity
Total liabilities and common equity
$
Explanation / Answer
Sales last year = 49.95 Million
Sales this year = 79.61 Million
% increase = (79*.61 - 49.95) / 49.95 = 59.38 % =
The new balance sheet is:
Assets Equity and liability Current assets 16.08 Accounts Payable 8.17 Net Fixed Assets 14.36 Notes Payable 2.95 Bonds payable 10.66 Common Equity 8.66 Total 30.44 Total 30.44Related Questions
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