Stevens Textile\'s 2013 financial statements are shown below: Balance Sheet as o
ID: 2639249 • Letter: S
Question
Stevens Textile's 2013 financial statements are shown below:
Balance Sheet as of December 31, 2013 (Thousands of Dollars)
Cash
$ 1,080
Accounts payable
$ 4,320
Receivables
6,480
Accruals
2,880
Inventories
9,000
Line of credit
0
Total current assets
$16,560
Notes payable
2,100
Net fixed assets
12,600
Total current liabilities
$ 9,300
Mortgage bonds
3,500
Common stock
3,500
Retained earnings
12,860
Total assets
$29,160
Total liabilities and equity
$29,160
Income Statement for December 31, 2013 (Thousands of Dollars)
Sales
$36,000
Operating costs
32,440
Earnings before interest and taxes
$ 3,560
Interest
460
Pre-tax earnings
$ 3,100
Taxes (40%)
1,240
Net income
$ 1,860
Dividends (45%)
$ 837
Addition to retained earnings
$ 1,023
Suppose 2014 sales are projected to increase by 25% 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 9%, 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.
Total assets =
AFN =
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 =
Cash
$ 1,080
Accounts payable
$ 4,320
Receivables
6,480
Accruals
2,880
Inventories
9,000
Line of credit
0
Total current assets
$16,560
Notes payable
2,100
Net fixed assets
12,600
Total current liabilities
$ 9,300
Mortgage bonds
3,500
Common stock
3,500
Retained earnings
12,860
Total assets
$29,160
Total liabilities and equity
$29,160
Explanation / Answer
Stevens Textiles
Pro Forma Income Statement
December 31, 2013
(Thousands of Dollars)
Forecast
Pro Forma
Basis
Sales
$36,000
1.15
Stevens Textiles
Pro Forma Income Statement
December 31, 2013
(Thousands of Dollars)
Forecast
Pro Forma
Basis
Sales
$36,000
1.15
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