This is the second part of a final project. My question is if all amounts concer
ID: 2436576 • Letter: T
Question
This is the second part of a final project. My question is if all amounts concerning Step 4 need to be calculated from the prior year's income statement to reflect the 80%? For example, the prior year's 'Bakery Sales' amounted to $327,322.55. Is this amount then multiplied by the 80% to budget into the 2018 pro forma statements? Any and all help appreciated.
5. Cash: $7,000. Accounts receivable amount to 4.0 turns (accounts receivable turnover will be 4.0); inventory amount to show 3.0 turns (inventory turnover will be 3.0). No stock will be issued. Retained earnings are to equal net income. Additional financing of $5,000 will be long-term. Add remaining amount needed to balance into accounts payable.
173,652.87
The company is planning to open another location in 2018 . Prepare pro forma financials for 2018 for the new location using the following information: 1. Cost of leasing commercial space: $1,500 per month. 2. Cost of new equipment: $15,000. Use straight-line depreciation assuming a seven-year life. Use full year’s depreciation for the first year. 3. Cost of hiring and training new employees: three at $25,000 each for the first year. 4. Except as noted in 5, assets, current liabilities, sales, costs, and expenses are expected to be 80% of the existing store (from preliminary statements) except no stock. Retained earnings = net income.5. Cash: $7,000. Accounts receivable amount to 4.0 turns (accounts receivable turnover will be 4.0); inventory amount to show 3.0 turns (inventory turnover will be 3.0). No stock will be issued. Retained earnings are to equal net income. Additional financing of $5,000 will be long-term. Add remaining amount needed to balance into accounts payable.
Peyton Approved Income Statement For Year Ended 12/31/2017 Bakery Sales $ 327,322.55 Merchandise Sales 1,205.64 Total Revenues 328,528.19 Cost of Goods Sold - Baked 105,834.29 Cost of Goods Sold - Merchandise 859.77 Total Cost of Goods Sold 106,694.06 Gross Profit 221,834.13 Operating Expenses: Rent Expense 24,549.19 Wages Expense 10,670.72 Misc. Supplies Expense 3,000.46 Business License Expense 2,045.77 Misc. Expense 1,363.84 Depreciation Expense 677.86 Insurance Expense 1,091.08 Advertising Expense 1,549.74 Interest Expense 818.31 Telephone Expense 490.98 Gain/Loss on disposal of equipment 100.00 Total Operating Expenses: 46,357.95 Net Income 175,476.18 Assets Liabilities and Owners' Equity Current Assets: Current Liabilities: Cash 68,520.04 Accounts Payable 23,437.11 Accounts Receivable 68,519.91 Wages Payable 3,383.28 Other Receivables- Insurance 700.00 Customer Deposit 1,000.00 Baking Supplies 18,681.70 Interest Payable 211.46 Consignment Inventory 200.00 Merchandise Inventory 1,038.07 Prepaid Rent 2,114.55 Prepaid Insurance 2,114.55 Misc. Supplies 170.49 Total Current Liabilities 28,031.85 Total Current Assets 162,059.31 Long Term Liabilities: Notes Payable 5,000.00 Total Long-Term Liabilities: 5,000.00 Total Liabilities: 33,031.85 Long Term/Fixed Assets: Common Stock 20,000.00 Baking Equipment 12,000.00 Retained Earnings 120,621.02 Accumulated Depreciation 406.44 Net Fixed assets 11,593.56 Total Equity 140,621.02 Total Assets: 173,652.87 Total Liabilities & Equity173,652.87
Explanation / Answer
As in Step 4 it is mentioned that "assets, current liabilities, sales, costs, and expenses are expected to be 80% of the existing store" then your calculation is valid. As the statement says it has to be 80% of exististing, so multiplying 80% with existing amount would be correct.
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