Explore BrainMass
Share

Preparing forecasted financial statements

This content was STOLEN from BrainMass.com - View the original, and get the already-completed solution here!

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.

© BrainMass Inc. brainmass.com October 17, 2018, 11:57 am ad1c9bdddf
https://brainmass.com/business/accounting/preparing-forecasted-financial-statements-559404

Attachments

Solution Preview

Hello,

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

$2.19
Similar Posting

Prepare forecasted financial statement with certain assumptions

Kodak: CASE 9-1
INCOME STATEMENT
For Year Ended December 31 (in millions) 20x6 20x5 20x4
Net sales ..................... $13,234 $13,994 $14,089
Cost of goods sold..................... 8,670 8,375 8,086
Gross profit........................... 4,564 5,619 6,003
Selling, general, and administrative expenses................................. 2,781 2,665 2,846
Research and development costs.......... .. 779 784 817
Restructuring costs (credits) and other.......................................659 (44) 350
Earnings from operations .................. 345 2,214 1,990
Interest expense .............. ........... 219 178 142
Other income (charges) ................... (18) 96 261
Earnings before income taxes .............. 108 2,132 2,109
Provision for income taxes...... ........... 32 725 717
Net earnings ........................... $ 76 $ 1,407 $ 1,392

BALANCE SHEET
At December 31 (in millions, except share and 20x6 20x5
Assets
Current assets
Cash and cash equivalents ...................$ 448 $ 246
Receivables, net ........................... 2,337 2,653
Inventories, net............................ 1,137 1,718
Deferred income taxes ........................ 521 575
Other current assets ......................... 240 299
Total current assets ........................ 4,683 5,491
Property, plant, and equipment, net ......................................... 5,659 5,919
Goodwill, net.................................. 948 947
Other long-term assets....................... 2,072 1,855
Total assets......................... ...... $13,362 $14,212
Liabilities and shareholders' equity
Current liabilities
Accounts payable and other current liabilities ................................ $ 3,276 $ 3,403
Short-term borrowings......................... 1,378 2,058
Current portion of long-term debt............................................ 156 148
Accrued income taxes ........................... 544 606
Total current liabilities .................... 5,354 6,215
Long-term debt, net of current portion ...................................... 1,666 1,166
Postemployment liabilities ................... 2,728 2,722
Other long-term liabilities .................... 720 681
Total liabilities ........................... 10,468 10,784
Shareholders' equity
Common stock, $2.50 par value
950,000,000 shares authorized: issued 391,292,760 shares in 20x6 and 20x5;
290,929,701 and 290,484,266 shares outstanding in 20x6 and 20x5 ........................... 978 978
Additional paid in capital...................... 849 871
Retained earnings............................. 7,431 7,869
Accumulated other comprehensive loss ......................................... (597) (482)
8,661 9,236
Treasury stock, at cost; 100,363,059 shares in 20x6 and 100,808,494 shares in 20x5........... (5,767) (5,808)
Total shareholders' equity.....................2,894 ....3,428
Total liabilities and shareholders' equity ..................................... $13,362 $14,212

Questions:

Prepare forecasts of its income statement, balance sheet, and statement of cash flows for 20x7
under the following assumptions:
c. Taxes payable are at the 20x6 level of $544 million.
d. Depreciation expense charged to SG&A is $765 million and $738 million for 20x6 and 20x5, respectively.

View Full Posting Details