Financing Deficit Stevens Textile Corporation's 2019 financial statements are shown below: Balance Sheet as of December 31, 2019 (Thousands of Dollars) Cash $ 1,080 Accounts payable $ 4,320 Receivables 6,480 Accruals 2,880 Inventories 9,000 Line of credit 0 Total current assets $16,560 Notes payable 2,100 Net fixed assets 12,600 Total current liabilities $ 9,300 Mortgage bonds 3,500 Common stock 3,500 Retained earnings 12,860 Total assets $29,160 Total liabilities and equity $29,160 Income Statement for December 31, 2019 (Thousands of Dollars) Sales $36,000 Operating costs 34,000 Earnings before interest and taxes $ 2,000 Interest 160 Pre-tax earnings $ 1,840 Taxes (25%) 460 Net income $ 1,380 Dividends (40%) $ 552 Addition to retained earnings $ 828 Stevens grew rapidly in 2019 and financed the growth with notes payable and long-term bonds. Stevens expects sales to grow by 15% in the next year but will finance the growth with a line of credit, not notes payable or long-term bonds. Use the forecasted financial statement method to forecast a balance sheet and income statement for December 31, 2020. The interest rate on all debt is 10%, and cash earns no interest income. The line of credit is added at the end of the year, which means that you should base the forecasted interest expense on the balance of debt at the beginning of the year. Use the forecasted income statement to determine the addition to retained earnings. Assume that the company was operating at full capacity in 2019, that it cannot sell off any of its fixed assets, and that assets, spontaneous liabilities, and operating costs are expected to increase by the same percentage as sales. Determine the required line of credit. Do not round intermediate calculations. Round your answers to the nearest dollar. Total assets: $ LOC: $

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Financing Deficit

Stevens Textile Corporation's 2019 financial statements are shown below:

Balance Sheet as of December 31, 2019 (Thousands of Dollars)

Cash	$ 1,080	Accounts payable	$ 4,320
Receivables	6,480	Accruals	2,880
Inventories	9,000	Line of credit	0
Total current assets	$16,560	Notes payable	2,100
Net fixed assets	12,600	Total current liabilities	$ 9,300
		Mortgage bonds	3,500
		Common stock	3,500
		Retained earnings	12,860
Total assets	$29,160	Total liabilities and equity	$29,160

Income Statement for December 31, 2019 (Thousands of Dollars)

Sales	$36,000
Operating costs	34,000
Earnings before interest and taxes	$ 2,000
Interest	160
Pre-tax earnings	$ 1,840
Taxes (25%)	460
Net income	$ 1,380
Dividends (40%)	$ 552
Addition to retained earnings	$ 828

Stevens grew rapidly in 2019 and financed the growth with notes payable and long-term bonds. Stevens expects sales to grow by 15% in the next year but will finance the growth with a line of credit, not notes payable or long-term bonds. Use the forecasted financial statement method to forecast a balance sheet and income statement for December 31, 2020. The interest rate on all debt is 10%, and cash earns no interest income. The line of credit is added at the end of the year, which means that you should base the forecasted interest expense on the balance of debt at the beginning of the year. Use the forecasted income statement to determine the addition to retained earnings. Assume that the company was operating at full capacity in 2019, that it cannot sell off any of its fixed assets, and that assets, spontaneous liabilities, and operating costs are expected to increase by the same percentage as sales. Determine the required line of credit. Do not round intermediate calculations. Round your answers to the nearest dollar.

Total assets: $

LOC: $

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