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Marketable securities and other current liabilities are expected to remain unchanged

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Pro Forma Balance Sheet;Peabody & Peabody;31-Dec-17;Assets;Current assets;Cash;Marketable securities;Accounts receivable;Inventories;Total current assets;Net fixed assets;Total assets;Liabilities and stockholders equity;Current liabilities;Accounts payable;Accruals;Other current liabilities;Total current liabilities;Long-term debts;Total liabilities;Common equity;External funds required;Total liabilities and stockholders equity;Pro forma balance sheet Peabody & Peabody has 2015 sales of $10 million. It;wishes to analyze expected performance and financing needs for 2017, which is;2 years ahead. Given the following information, respond to parts a and b.;(1) The percents of sales for items that vary directly with sales are as follows;Accounts receivable, 12%;Inventory, 18%;Accounts payable, 14%;Net profit margin, 3%;(2) Marketable securities and other current liabilities are expected to remain;unchanged.;(3) A minimum cash balance of $480,000 is desired.;(4) A new machine costing $650,000 will be acquired in 2016, and equipment;costing $850,000 will be purchased in 2017. Total depreciation in 2016 is;forecast as $290,000, and in 2017 $390,000 of depreciation will be taken.;(5) Accruals are expected to rise to $500,000 by the end of 2017.;(6) No sale or retirement of long-term debt is expected.;(7) No sale or repurchase of common stock is expected.;(8) The dividend payout of 50% of net profits is expected to continue.;Beginning net fixed assets (January 1, 2016);Plus: Fixed asset outlays;Less: Depreciation expense;Ending net fixed assets (December 31, 2017);Note: Common equity is the sum of common stock and retained;earnings.;Beginning common equity (January 1, 2016);Plus: Net profits after taxes (2016);Net profits after taxes (2017);Less: Dividends paid (2016);Dividends paid (2017);Ending common equity (December 31, 2017);NOTE: Assets = Liabilities + Equity;(9) Sales are expected to be $11 million in 2016 and $12 million in 2017.;(10) The December 31, 2015, balance sheet follows.;a. Prepare a pro forma balance sheet dated December 31, 2017.;b. Discuss the financing changes suggested by the statement prepared in part a.;Peabody & Peabody Balance Sheet December 31, 2015 ($000)

 

Paper#26480 | Written in 18-Jul-2015

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