Garlington Technologies Inc.\'s 2013 financial statements are shown below: Balan

Question

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 20% over 2013 sales and that 2014 dividends will increase to $208,000. Forecast the financial statements using the forecasted financial statement method. Assume the firm operated at full capacity in 2013. Use an interest rate of 13%, 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.

I only need help with finding the Addition to RE:. The answer is NOT 10,520.

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 $2,700,000

Explanation / Answer

Inyerest woudl be Notes payable *13% = 20280

Keeping the EBIT margin as constant follwing things have been arrived at

2013 2014 Sales 3600000 4320000 Operating costs 3279720 3935664 EBIT 320280 8.90% 384336 Interest 18280 20280 Pre-tax earnings 302000 364056 Taxes (40%) 120800 145622.4 Net income 181200 218433.6 Dividends 108000 208000 Addition to Re 10433.6

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