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Question;Assume;ABC Company has asked you to not only prepare their 2013 year-end Balance Sheet;but to also provide pro-forma financial statements for 2014. In addition, they;have asked you to evaluate their company based on the pro-forma statements with;regard to ratios. They also want you to evaluate 3 projects they are;considering. Their information is as follows;End;of the year information;Account;12/31/13;Ending Balance;Cash;160,000;Accounts Receivable;126,000;Inventory;75,200;Equipment;745,000;Accumulated Depreciation;292,460;Accounts Payable;36,900;Short-term Notes Payable;18,300;Long-term Notes Payable;157,225;Common Stock;450,000;Retained Earnings;solve;Additional Information;?;Sales;for December total 12,000 units. Each month?s sales are expected to exceed the;prior month?s results by 5%. The product?s selling price is $15 per unit.;?;Company;policy calls for a given month?s ending inventory to equal 80% of the next;month?s expected unit sales. The December 31 2012 inventory is 9,400 units;which complies 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;the sales. The sales manager?s monthly salary will be $3,500 in January and;$4,000 per month 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 the month of sale).;?;All;merchandise purchases are on credit, and no payables arise from any other;transactions. One month?s purchases are fully paid in the next month.;?;The;minimum ending cash balance for all months is $140,000. If necessary, the;company borrows enough cash using a short-term note to reach the minimum.;Short-term notes require an interest payment of 1% at each month-end (before;any repayment). If the ending cash balance exceeds the minimum, the excess will;be applied to repaying the short-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 Company?s management is also;considering 3 new projects consisting of the purchase of new equipment. The;company has limited resources, and may not be able to complete make all 3 purchases.;The information is as follows for the purchases below.;Project 1;Project 2;Project 3;Purchase;Price;$50,000;$75,000;$32,500;Required;Rate of Return;12%;8%;10%;Time;Period;3;years;5;years;2;years;Cash;Flows ? Year 1;$18,000;$25,000;$20,000;Cash;Flows ? Year 2;$22,000;$20,000;$18,000;Cash;Flows ? Year 3;$22,000;$18,000;N/A;Cash;Flows ? Year 4;N/A;$16,500;N/A;Cash;Flows ? Year 5;N/A;$15,000;N/A;Required 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 the cost 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 accounts receivable.;Expected cash payments for;purchases and the expected March 31 balance of accounts payable.;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;analysis must also be done in Excel, not in a;separate document.;This;assignment must be submitted as 1 Excel document.

 

Paper#39017 | Written in 18-Jul-2015

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