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    Preparing forecasted financial statements

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    Financing Deficit
    Balance Sheet as of December 31, 2013

    Cash...........................$ 180,000 Accounts payable.....................$ 360,000
    Receivables....................360,000 Notes payable.............................156,000
    Inventories......................720,000 Line of credit........................................ 0
    Total current assets......$ 1,260,000 Accruals....................................... 180,000
    Fixed assets.....................1,440,000 Total current liabilities............$ 696,000
    Common stock ............................1, 800, 000
    Retained earnings....................... 204,000
    Total assets.................... $2,700,000
    Total liabilities and equity..........$ 2,700,000

    Income Statement for December 31, 2013

    Sales $3,600,000
    Operating costs 3,279,720
    EBIT $ 320,280
    Interest 18,280
    Pre-ax earnings $ 302,000
    Taxes (40%) 120,000
    Net income $ 181,200
    Dividends $ 108,000

    Suppose that in 2014 sales increase by 10% over 2013 sales and that 2014 dividends will increase to $112,000. Forecast the financial statements using the forecasted financial statement method. Assume the firm operated at full capacity in 2013. Use an interest rate of 13%, and assume that any new debt will be added at the end of the yea (so forecast the interest expense based on the debt balance at the beginning of the year). Cash does not earn any interest income. Assume that all new debt will be in the form of a line of credit.

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    https://brainmass.com/business/accounting/preparing-forecasted-financial-statements-559404

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    You will find an attachment with a dynamic Excel sheet showing the suggested solution. it shows how to prepare ...

    Solution Summary

    A dynamic Excel sheet shows how to prepare forecasted financial statements using the percentage of Sales Method.
    You will see that the forecasting approach is broken down into the following steps:
    First Step: Percentage of Sales Calculations
    Second Step: Partial Pro-Forma Financial Statements
    3rd Step: Calculation of the line of credit needed
    Last Step: Pro-Forma Financial Statements

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