Suppose 2014 sales are projected to increase by 20% over 2013 sales. Use the for

Question

Suppose 2014 sales are projected to increase by 20% 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 11%, 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.

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     $   

Total assets $    AFN $    Stevens Textile's 2013 financial statements are shown below: Balance Sheet as of December 31, 2013 (Thousands of Dollars) Cash 1,080 Accounts payable Receivables 6,480 Accruals Inventories 9,000 Line of credit Total current assets $16,560 Notes payable 12,600 Total current liabilities Net fixed assets Mortgage bonds Common stock Retained earnings Total assets $29,160 Total liabilities and equity Income Statement for December 31, 2013 (Thousands of Dollars) Sales $36,000 32,440 Operating costs 3,560 Earnings before interest and taxes 460 Interest 3,100 Pre-tax earnings 1,240 Taxes (40%) Net income 1,860 837 Dividends (45%) 1,023 Addition to retained earnings 4,320 2,880 2,100 9,300 3,500 3,500 12,860 $29,160

Explanation / Answer

Forecasted Income Statement for December 31,2014 -'000s of Dollars Sales 43200 Operating Costs 38928 EBIT 4272 Interest(2100+3500)*11% 616 Pre-tax earnings 3656 Taxes @ 40% 1462 Net Income 2194 Dividends(45%) 987 Addition to Retained Earnings 1206 Forecasted Balance Sheet as of December31 ,2014 -'000s of Dollars Cash 1296 Accounts Payables 5184 Receivables 7776 Accruals 3456 Inventories 10800 Line of Credit(Bal.Fig.) 2766 Total Current Assets 19872 Notes Payables 2520 Net Fixed Assets 15120 Total Current Liabilities 13926 Mortgage bonds 3500 Common Stock 3500 Retained Earnings 14066 Total Assets 34992 Total Liabilities & Equity 34992 Additional funds Needed= Increase in Assets- Spontaneous Increase in Liabilities- Increase in Retained Earnings                                                        =(20%*29160)-((4320+2880+2100)*20%)-(1206) 2766 Total assets 34992 AFN 2766 Notes payable         2520

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