Handyman Company Comparative Balance Sheet Year-End 2012 Assets Current assets:

Question

Handyman Company Comparative Balance Sheet Year-End 2012 Assets Current assets: Cash Inventories Accounts receivable Total current assets 10.00 153.00 27.00 190.00 Fixed assets: 199.00 9.00 190.00 and equip Pro Accumulated depr Net fixed assets ation Total assets $380.00 Liabilities and owner's equi Current liabilities: Accounts payable Short-term loans payable Total current liabilities 74.00 10.00 $84.00 Long-term liabilities: Long-term debt Total long-term liabilities 207.00 $207.00 Total Liabilities $291.00 Owner's equi ital stock Retained earnings Total owner's equit 50.00 39.00 $89.00 Total lia bilities and owner's equi $380.00

Explanation / Answer

Answer: The forecasted Income account and Balance Sheet for 2013 are given below:

COMPARATIVE BALANCE SHEET FOR 2013 ASSETS 80% Debt 70% Debt 90% Debt Current assets: cash 14.00 14.00 14.00 inventories 214.20 214.20 214.20 accounts receivable 37.80 37.80 37.80 total current assets 266.00 266.00 266.00 Fixed Assets: Prop and equipment 278.57 278.57 278.57 accumulated depn 16.96 16.96 16.96 Net fixed assets 261.61 261.61 261.61 Total Assets 527.61 527.61 527.61 Current Liabilities: Accounts payable 104.33 104.33 104.33 short term loans 26.67 26.67 26.67 Total current liabilities 133.00 133.00 133.00 Long term liabilities 289.09 236.33 341.85 289.09 236.33 341.85 Total liabilities 422.09 369.33 474.85 Owners equity Capital stock 65.12 116.48 13.77 Retained earnings 40.40 41.81 38.99 Total owners equity 105.52 158.28 52.76 Total liabilities and owners equity 527.61 527.61 527.61 INCOME STATEMENT FOR 2013 Sales 980.00 980.00 980.00 cost of goods sold 726.60 726.60 726.60 gross margin 253.40 253.40 253.40 interest expense 26.34 24.23 28.45 other operating expense 224.96 224.96 224.96 income before tax 2.10 4.21 -0.01 income tax 0.70 1.40 0.00 Net Income 1.40 2.81 -0.01 STATEMENT OF RETAINED EARNINGS Opening balance 39.00 39.00 39.00 Net income 1.40 2.81 -0.01 dividends 0 0 0 closing balance 40.40 41.81 38.99 Assumptions made: 1) Cost of goods sold & Operating expenses are also assumed to increase by 40%. 2) Equity of 15.12 is brought in to make total equity 20% of total assets, total debt being 80%-as given. 3) Depreciation: old assets 199*3.33% = 6.63 new assets 79.57*1.67%=1.33 total        7.96 for 2013 accumulated=9+7.96=16.96 (STL.10*.06+16.67*.03) = 6+0.50=6.5 (207*.08+82.09*.04)=16.56+3.28=19.84 (STL.10*.06+16.67*.03) = 6+0.50=6.5 (207*.08+29.33*.04)=16.56+1.17=17.73 (STL.10*.06+16.67*.03) = 6+0.50=6.5 (207*.08+134.85*.04)=16.56+5.39=21.95 3) The sum of long term debt and equity is not the same under 70,80,90 of total debt assumption because Current liabilites included in 70,80,90 % of debt is constant at 133

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