Noah’s ark video games expects sales to grow by 25% next year. Assume that it pays out 95% of its net income. Using the following statements and the percent of sales method, forecast property plant and equipment
Noah’s ark video games expects sales to grow by 25% next year. Assume that it pays out 95% of its net income. Using the following statements and the percent of sales method, forecast property plant and equipment
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Noah’s ark video games expects sales to grow by 25% next year. Assume that it pays out 95% of its net income. Using the following statements and the percent of sales method, forecast property plant and equipment
![### Financial Statements Overview
#### Income Statement
The income statement for Year 0 presents the following information:
- **Sales**: $320,000
- **Costs Except Depreciation**: ($150,000)
- **EBITDA**: $170,000
- **Depreciation**: ($15,000)
- **EBIT**: $155,000
- **Interest Expense (net)**: ($3,000)
- **Pretax Income**: $152,000
- **Income Tax**: ($53,200)
- **Net Income**: $98,800
#### Explanation:
- **Sales** represents the total revenue generated.
- **Costs Except Depreciation** includes all operating expenses other than depreciation, shown as a negative amount because it is an expense.
- **EBITDA** (Earnings Before Interest, Taxes, Depreciation, and Amortization) is calculated as Sales minus Costs Except Depreciation.
- **Depreciation** is an expense reflecting the reduction in value of the company’s tangible fixed assets over time.
- **EBIT** (Earnings Before Interest and Taxes) is obtained by subtracting Depreciation from EBITDA.
- **Interest Expense (net)** represents the net cost of interest, typically on borrowed funds.
- **Pretax Income** is calculated by subtracting Interest Expense from EBIT.
- **Income Tax** represents the estimated tax liability.
- **Net Income** is the profit remaining after subtracting Income Tax from Pretax Income.
#### Balance Sheet
The balance sheet for Year 0 provides a snapshot of the company's financial position:
- **Assets**:
- **Cash and Equivalents**: $25,000
- **Accounts Receivable**: $48,000
This information helps users understand the company's resource availability and operational performance during Year 0. The balance sheet specifically highlights the liquid assets of the company. The income statement gives a breakdown of profit and expense components leading to the net income figure.
For a more comprehensive analysis, users typically look at additional details in the balance sheet, such as liabilities and equity, which are not provided in this particular image.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F62ef46e2-1b41-490a-9d0b-4f5756a0a089%2Fc32f778f-d980-48fc-aaaf-61fd2ad521df%2Fqzyxizi_processed.jpeg&w=3840&q=75)
Transcribed Image Text:### Financial Statements Overview
#### Income Statement
The income statement for Year 0 presents the following information:
- **Sales**: $320,000
- **Costs Except Depreciation**: ($150,000)
- **EBITDA**: $170,000
- **Depreciation**: ($15,000)
- **EBIT**: $155,000
- **Interest Expense (net)**: ($3,000)
- **Pretax Income**: $152,000
- **Income Tax**: ($53,200)
- **Net Income**: $98,800
#### Explanation:
- **Sales** represents the total revenue generated.
- **Costs Except Depreciation** includes all operating expenses other than depreciation, shown as a negative amount because it is an expense.
- **EBITDA** (Earnings Before Interest, Taxes, Depreciation, and Amortization) is calculated as Sales minus Costs Except Depreciation.
- **Depreciation** is an expense reflecting the reduction in value of the company’s tangible fixed assets over time.
- **EBIT** (Earnings Before Interest and Taxes) is obtained by subtracting Depreciation from EBITDA.
- **Interest Expense (net)** represents the net cost of interest, typically on borrowed funds.
- **Pretax Income** is calculated by subtracting Interest Expense from EBIT.
- **Income Tax** represents the estimated tax liability.
- **Net Income** is the profit remaining after subtracting Income Tax from Pretax Income.
#### Balance Sheet
The balance sheet for Year 0 provides a snapshot of the company's financial position:
- **Assets**:
- **Cash and Equivalents**: $25,000
- **Accounts Receivable**: $48,000
This information helps users understand the company's resource availability and operational performance during Year 0. The balance sheet specifically highlights the liquid assets of the company. The income statement gives a breakdown of profit and expense components leading to the net income figure.
For a more comprehensive analysis, users typically look at additional details in the balance sheet, such as liabilities and equity, which are not provided in this particular image.
![### Financial Overview and Balance Sheet
This section provides a summarized overview of a company's financial standing, specifically highlighting the net income and detailed balance sheet for Year 0.
#### Net Income
- The net income for the period is $98,800.
#### Balance Sheet for Year 0
**Assets**
- **Cash and Equivalents**: $25,000
- This represents the total of all cash or cash-equivalent assets that are readily available for use.
- **Accounts Receivable**: $12,000
- Represents the outstanding bills or invoices that customers owe to the company.
- **Inventories**: $5,000
- This is the total value of the products or raw materials that the company has in stock.
- **Total Current Assets**: $42,000
- Sum of all short-term assets that are expected to be converted into cash within the year.
- **Property, Plant and Equipment**: $120,000
- This encompasses the value of all tangible, long-term assets such as buildings, machinery, and land.
- **Total Assets**: $162,000
- Represents the sum of the company's current and long-term assets.
**Liabilities and Equity**
- **Accounts Payable**: $45,000
- Debts and bills that the company owes to suppliers and creditors.
- **Debt**: $48,000
- This includes all types of borrowings such as loans and bonds that the company is obligated to repay.
- **Total Liabilities**: $93,000
- The sum of accounts payable and all other debts.
- **Stockholders' Equity**: $69,000
- Represents the owners' claim after all liabilities have been settled. It includes retained earnings and common stock.
- **Total Liabilities and Equity**: $162,000
- This equals the total assets, ensuring that the balance sheet is balanced as per accounting principles.
The balance sheet is a critical financial statement providing an at-a-glance view of a company’s financial health by detailing its assets, liabilities, and equity at a specific point in time.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F62ef46e2-1b41-490a-9d0b-4f5756a0a089%2Fc32f778f-d980-48fc-aaaf-61fd2ad521df%2Fcqu0b8_processed.jpeg&w=3840&q=75)
Transcribed Image Text:### Financial Overview and Balance Sheet
This section provides a summarized overview of a company's financial standing, specifically highlighting the net income and detailed balance sheet for Year 0.
#### Net Income
- The net income for the period is $98,800.
#### Balance Sheet for Year 0
**Assets**
- **Cash and Equivalents**: $25,000
- This represents the total of all cash or cash-equivalent assets that are readily available for use.
- **Accounts Receivable**: $12,000
- Represents the outstanding bills or invoices that customers owe to the company.
- **Inventories**: $5,000
- This is the total value of the products or raw materials that the company has in stock.
- **Total Current Assets**: $42,000
- Sum of all short-term assets that are expected to be converted into cash within the year.
- **Property, Plant and Equipment**: $120,000
- This encompasses the value of all tangible, long-term assets such as buildings, machinery, and land.
- **Total Assets**: $162,000
- Represents the sum of the company's current and long-term assets.
**Liabilities and Equity**
- **Accounts Payable**: $45,000
- Debts and bills that the company owes to suppliers and creditors.
- **Debt**: $48,000
- This includes all types of borrowings such as loans and bonds that the company is obligated to repay.
- **Total Liabilities**: $93,000
- The sum of accounts payable and all other debts.
- **Stockholders' Equity**: $69,000
- Represents the owners' claim after all liabilities have been settled. It includes retained earnings and common stock.
- **Total Liabilities and Equity**: $162,000
- This equals the total assets, ensuring that the balance sheet is balanced as per accounting principles.
The balance sheet is a critical financial statement providing an at-a-glance view of a company’s financial health by detailing its assets, liabilities, and equity at a specific point in time.
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
![FINANCIAL ACCOUNTING](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781259964947/9781259964947_smallCoverImage.jpg)
![Accounting](https://www.bartleby.com/isbn_cover_images/9781337272094/9781337272094_smallCoverImage.gif)
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
![Accounting Information Systems](https://www.bartleby.com/isbn_cover_images/9781337619202/9781337619202_smallCoverImage.gif)
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
![FINANCIAL ACCOUNTING](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781259964947/9781259964947_smallCoverImage.jpg)
![Accounting](https://www.bartleby.com/isbn_cover_images/9781337272094/9781337272094_smallCoverImage.gif)
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
![Accounting Information Systems](https://www.bartleby.com/isbn_cover_images/9781337619202/9781337619202_smallCoverImage.gif)
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
![Horngren's Cost Accounting: A Managerial Emphasis…](https://www.bartleby.com/isbn_cover_images/9780134475585/9780134475585_smallCoverImage.gif)
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
![Intermediate Accounting](https://www.bartleby.com/isbn_cover_images/9781259722660/9781259722660_smallCoverImage.gif)
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
![Financial and Managerial Accounting](https://www.bartleby.com/isbn_cover_images/9781259726705/9781259726705_smallCoverImage.gif)
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education