Question;Assume ABC Company has asked you to not only prepare their 2013 year-end Balance Sheet butto also provide pro-forma financial statements for 2014. In addition, they have asked you toevaluate their company based on the pro-forma statements with regard to ratios. They also wantyou to evaluate 3 projects they are considering. Their information is as follows:End of the year information:AccountCashAccounts ReceivableInventoryEquipmentAccumulated DepreciationAccounts PayableShort-term Notes PayableLong-term Notes PayableCommon StockRetained Earnings12/31/13Ending Balance160,000126,00075,200745,000292,46036,90018,300157,225450,000solveAdditional Information:Sales for December total 12,000 units. Each months sales are expected to exceed theprior months results by 5%. The products selling price is $15 per unit.Company policy calls for a given months ending inventory to equal 80% of the nextmonths expected unit sales. The December 31 2012 inventory is 9,400 units, whichcomplies with the policy. The purchase price is $8 per unit.Sales representatives commissions are 10.0% of sales and are paid in the month of thesales. The sales managers monthly salary will be $3,500 in January and $4,000 permonth thereafter.Monthly general and administrative expenses include $8,000 administrative salaries,$5,000 depreciation, and 0.9% monthly interest on the long-term note payable.The company expects 30% of sales to be for cash and the remaining 70% on credit.Receivables are collected in full in the month following the sale (none is collected in themonth of sale).All merchandise purchases are on credit, and no payables arise from any othertransactions. One months purchases are fully paid in the next month.The minimum ending cash balance for all months is $140,000. If necessary, the companyborrows enough cash using a short-term note to reach the minimum. Short-term notesrequire an interest payment of 1% at each month-end (before any repayment). If theending cash balance exceeds the minimum, the excess will be applied to repaying theshort-term notes payable balance.Dividends of $100,000 are to be declared and paid in February.No cash payments for income taxes are to be made during the first calendar quarter.Income taxes will be assessed at 35% in the quarter.Equipment purchases of $55,000 are scheduled for March.ABC Companys management is also considering 3 new projects consisting of the purchaseof new equipment. The company has limited resources, and may not be able to completemake all 3 purchases. The information is as follows for the purchases below.Project 1Project 2Project 3Purchase Price$50,000$75,000$32,500Required Rate of Return12%8%10%Time Period3 years5 years2 yearsCash Flows Year 1$18,000$25,000$20,000Cash Flows Year 2$22,000$20,000$18,000Cash Flows Year 3$22,000$18,000N/ACash Flows Year 4N/A$16,500N/ACash Flows Year 5N/A$15,000N/APage 2 of 3BMAL 530Required Action:Part A:Prepare the year-end balance sheet for 2013. Be sure to use proper headings.Prepare budgets such that the pro-forma financial statements may be prepared.Sales budget, including budgeted sales for April.Purchases budget, the budgeted cost of goods sold for each month and quarter, and thecost of the March 31 budgeted inventory.Selling expense budget.General and administrative expense budget.Expected cash receipts from customers and the expected March 31 balance of accountsreceivable.Expected cash payments for purchases and the expected March 31 balance of accountspayable.Cash budget.Budgeted income statement.Budgeted statement of retained earnings.Budgeted balance sheet.Part B:Calculate using Excel formulas, the NPV of each of the 3 projects.It is possible that ABC Company may not be able to complete all 3 projects. Therefore,advise ABC Company as to the order in which they should pursue the projects (i.e.,which project should ABC Company attempt to do first, second, and last).Provide justification and analysis as to why you chose the order you did. The analysismust also be done in Excel, not in a separate document.
Paper#38608 | Written in 18-Jul-2015Price : $27