Presented is the income statement and balance sheet for PartsCo, a $1.2 billion supplier of machinery parts. The company is expected to increase revenues by 8 percent annually for the next five years. Forecast the next five years of income statements for PartsCo. Assume that the next five years’ forecast ratios are identical to this year’s ratios. Forecast depreciation as a percentage of the prior year’s property, plant, and equipment. Forecast interest as a percentage of the prior year’s total debt. $ millionPrior Current Forecast Forecast Forecast Forecast Forecastyear1,100.0 1,188.0Income statementyearyear 1year 2 year 3 year 4 year 5RevenuesCost of sales(825.0)(891.0)Selling costsDepreciationOperating profit(165.0)(178.2)(27.6)(29.7)82.489.1(15.0)Interest expenseEarnings before taxes(15.0)67.474.1Тахes(20.2)(22.2)51.9Net income47.2Dividends19.021.0Prior Current Forecast Forecast Forecast Forecast ForecastBalance sheetyearyearyear 1 year 2 year 3 year 4 year 5AssetsWorking cash22.023.8Excess cash and marketable securities385.2377.6Accounts receivable110,0118.8Inventory123.8133.7Current assets641.0653.9Property, plant, and equipment440.0475.2Equity investments320.0320.0Total assets1,401.0 1,449.1Liabilities and equityAccounts payable123.8133.7Short-term debt90.090.0Accrued expenses88.095.0Current liabilities301.8318.7210.0210.0Long-term debtNewly issued debtCommon stock150.0150.0Retained earningsLiabilities and equity739,2770.41,401.01,449.1

The income statement determines the net income of the business by subtracting the total expenses…

Answered: Forecast Forecast Forecast Forecast…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Presented is the income statement and balance sheet for PartsCo, a $1.2 billion supplier of machinery parts. The company is expected to increase revenues by 8 percent annually for the next five years. Forecast the next five years of income statements for PartsCo. Assume that the next five years’ forecast ratios are identical to this year’s ratios. Forecast depreciation as a percentage of the prior year’s property, plant, and equipment. Forecast interest as a percentage of the prior year’s total debt.

$ million
Prior Current Forecast Forecast Forecast Forecast Forecast
year
1,100.0 1,188.0
Income statement
year
year 1
year 2 year 3 year 4 year 5
Revenues
Cost of sales
(825.0)
(891.0)
Selling costs
Depreciation
Operating profit
(165.0)
(178.2)
(27.6)
(29.7)
82.4
89.1
(15.0)
Interest expense
Earnings before taxes
(15.0)
67.4
74.1
Тахes
(20.2)
(22.2)
51.9
Net income
47.2
Dividends
19.0
21.0
Prior Current Forecast Forecast Forecast Forecast Forecast
Balance sheet
year
year
year 1 year 2 year 3 year 4 year 5
Assets
Working cash
22.0
23.8
Excess cash and marketable securities
385.2
377.6
Accounts receivable
110,0
118.8
Inventory
123.8
133.7
Current assets
641.0
653.9
Property, plant, and equipment
440.0
475.2
Equity investments
320.0
320.0
Total assets
1,401.0 1,449.1
Liabilities and equity
Accounts payable
123.8
133.7
Short-term debt
90.0
90.0
Accrued expenses
88.0
95.0
Current liabilities
301.8
318.7
210.0
210.0
Long-term debt
Newly issued debt
Common stock
150.0
150.0
Retained earnings
Liabilities and equity
739,2
770.4
1,401.0
1,449.1

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