Suppose 2014 sales are projected to increase by 20% over 2013 sales. Use the for

Question

Suppose 2014 sales are projected to increase by 20% over 2013 sales. Use the forecasted financial statement method to forecast a balance sheet and income statement for December 31, 2014. The interest rate on all debt is 11%, and cash earns no interest income. Assume that all additional debt in the form of a line of credit is added at the end of the year, which means that you should base the forecasted interest expense on the balance of debt at the beginning of the year. Use the forecasted income statement to determine the addition to retained earnings. Assume that the company was operating at full capacity in 2013, that it cannot sell off any of its fixed assets, and that any required financing will be borrowed as notes payable. Also, assume that assets, spontaneous liabilities, and operating costs are expected to increase by the same percentage as sales. Determine the additional funds needed. Round your answers to the nearest dollar. Do not round intermediate calculations.

What is the resulting total forecasted amount of the line of credit? Round your answer to the nearest dollar. Do not round intermediate calculations.
Notes payable     $   

Total assets $    AFN $    Stevens Textile's 2013 financial statements are shown below: Balance Sheet as of December 31, 2013 (Thousands of Dollars) Cash Receivables Inventories $ 4,320 2,880 0 2,100 $9,300 3,500 3,500 12,860 $29,160 $1,080 Accounts payable 6,480 Accruals 9,000 Line of credit Total current assets $16,560 Notes payable Total current liabilities Mortgage bonds Common stock Retained earnings Net fixed assets 12,600 Total assets Income Statement for December 31, 2013 (Thousands of Dollars) Sales Operating costs $29,160 Total liabilities and equity $36,000 32,440 $ 3,560 460 $3,100 1,240 $ 1,860 $ 837 1,023 Earnings before interest and taxes Interest Pre-tax earnings Taxes (40%) Net income Dividends (45%) Addition to retained earnings

Explanation / Answer

Projected income statement 2014 Sales 43,200 36000*1.2 operating costs 38,928 Earnings before interest and taxes     4,272 Interest 616 (3500*11%)+(2100*11%) Pre tax earnings     3,656 Taxes (405)     1,462 Net income     2,194 Dividend Balance sheets Cash 14,638 Accounts payable 5184 Receivables     7,776 accruals 3456 inventories 10,800 line of credit 0 total current assets 33,214 Notes payable 2520 (2100*1.2) Net Fixed assets 15,120 Total current liabilties 11160 Mortgage bonds 3500 Common Stock 3500 Retained earnings 15054 12860+2194 Total assets 33,214 Total current liabilties and Equity 33214 Total assets $33,214 Additional fund needed 13,558 14638-1080 Notes payable $2,520

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.