The most important part of the question is showing calculations so please make s

Question

The most important part of the question is showing calculations so please make sure to fill that section out as well. Thank you so much!

Percentage of Sales Problem

Below is the current income statement and balance sheet for your firm. Prepare the income statement and balance sheet for next year using the Percentage of Sales Forecasting Method. Show all work and calculations.

A. Sales are expected to grow to $1,800,000 next year.

B. The firm will pay out 50% of its net income as dividends next year.

C. Any net new financing will be derived from issuing additional common stock.

Income Statement Current Year Next Year Calculation Sales 1,500,000 Costs except depreciation (800,000) EBITDA 700,000 Depreciation (150,000) EBIT 550,000 Interest expense (net) (50,000) Pretax income 500,000 Income tax (200,000) Net Income 300,000 Balance Sheet Current Year Next Year Calculation Assets Cash and equivalents 1,200,000 Accounts receivable 800,000 Inventories 400,000 Total current assets 2,400,000 Property plant/equipment 1,800,000 Total assets 4,200,000 Liabilities and Equity Accounts payable 1,500,000 Debt 500,000 Total liabilities 2,000,000 Stockholders' equity 2,200,000 Total liabilities and equity 4,200,000 Second Pass Balance Sheet Current year Next year Calculation Assets Cash and equivalents Accounts receivable Inventories Total current assets Property plant/equipment Total assets Liabilities and equity Accounts payable Debt Total liabilities Stockholders' equity Total liabilities and equity

Explanation / Answer

Income Statement Current Year Next Year Calculation Sales 1,500,000 1800000 Costs except depreciation -800,000 -960000 -800000/1500000*1800000 EBITDA 700,000 840000 1800000+(-960000) Depreciation -150,000 -180000 150000/1800000*2160000(PPE net value) EBIT 550,000 660,000 840000+(-180000) Interest expense (net) -50,000 -50000 Assumed same Pretax income 500,000 610,000 660000+(-50000) Income tax -200,000 -256000 -200000/500000*640000 Net Income 300,000 354,000 610000+(-256000) Balance Sheet Current Year Next Year Calculation Assets Cash and equivalents 1,200,000 1263000 (1200000/1500000*1800000)-(50%*354000) Accounts receivable 800,000 960000 800000/1500000*1800000 Inventories 400,000 480000 400000/1500000*1800000 Total current assets 2,400,000 2,703,000 Total Property plant/equipment 1,800,000 2160000 1800000/1500000*1800000 Total assets 4,200,000 4,863,000 Total Liabilities and Equity Accounts payable 1,500,000 1800000 1500000/1500000*1800000 Debt 500,000 500000 Will not increase with sales Total liabilities 2,000,000 2,300,000 Total Stockholders' equity 2,200,000 2377000 2200000+354000-177000 External financing needed 186,000 4863000-2300000-2377000 Total liabilities and equity 4,200,000 4,863,000 Total=Total of assets side

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

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