The Cambridge Cartage Company has partially completed its forecast of next year\

Question

The Cambridge Cartage Company has partially completed its forecast of next year's financial statements. The firm pays interest at 10% on all borrowings and pays a combined state and federal tax rate of 40%. Complete the forecast income statement and balance sheet. Begin by guessing at interest expense as 10% of beginning debt. Enter your answers in thousands. For example, an answer of $1.2 million should be entered as 1, 200, not 1, 200,000. Round your answers to the nearest whole thousand. Enter all amounts as a positive

Explanation / Answer

The begining Debt is $5630. Interest expense for the year = 10%*5630 = $563

Income statement:

The debt at year end shall remain the same at $5630.

The equity at year end shall be increased by net profit = $6500 + $1522.2 = $8022.20

Particulars Amt ($000) Revenue 17220 Cost/ Expense 14120 EBIT 3100 Interest (as calculated above) 563 EBT 2537 Tax @ 40% 1014.80 Earnings After Tax/ Net Income 1522.20

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