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 $   

Explanation / Answer

Income Statement

Balance Sheet

Particulars 2013 Forecast Basis 2014 Sales 36000 1.20*36000 43200 Operating Costs 32440 0.9011*Sales 38928 Earnings before Interest & Taxes 3560 4272 Interest 460 (2100+3500)*10% 560 Pre Tax Earnings 3100 3712 Taxes (40%) 1240 1485 Net Income 1860 2227 Dividends (45%) 837 1002 Additions to retained earnings 1023 1225

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

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