Homework Help is Here – Start Your Trial Now!
Business
Accounting
Stevens Textile Corporation's 2019 financial statements are shown below: Balance Sheet as of December 31, 2019 (Thousands of Dollars) Cash Receivables Inventories Total current assets Net fixed assets $1,080 6,480 9,000 $16,560 12,600 Accounts payable Accruals Line of credit Notes payable Total current liabilities Mortgage bonds Common stock Retained earnings Total assets $29,160 Total liabilities and equity Income Statement for December 31, 2019 (Thousands of Dollars) $ 4,320 2,880 0 2,100 $ 9,300 3,500 3,500 12,860 $29,160

Stevens Textile Corporation's 2019 financial statements are shown below: Balance Sheet as of December 31, 2019 (Thousands of Dollars) Cash Receivables Inventories Total current assets Net fixed assets $1,080 6,480 9,000 $16,560 12,600 Accounts payable Accruals Line of credit Notes payable Total current liabilities Mortgage bonds Common stock Retained earnings Total assets $29,160 Total liabilities and equity Income Statement for December 31, 2019 (Thousands of Dollars) $ 4,320 2,880 0 2,100 $ 9,300 3,500 3,500 12,860 $29,160

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
See similar textbooks
icon
Related questions
Question

ff1

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 6,480 Accruals 9,000 Line of credit $16,560 Notes payable 12,600 Total current liabilities Mortgage bonds Common stock Retained earnings Total assets $29,160 Total liabilities and equity Income Statement for December 31, 2019 (Thousands of Dollars) Sales Operating costs Earnings before interest and taxes Interest Receivables Inventories Total current assets Net fixed assets Pre-tax earnings $ 4,320 2,880 0 $36,000 34,000 $ 2,000 160 $ 1,840 460 $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: $ Taxes (25%) Net income 2,100 $9,300 3,500 3,500 12,860 $29,160
Transcribed Image Text: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 6,480 Accruals 9,000 Line of credit $16,560 Notes payable 12,600 Total current liabilities Mortgage bonds Common stock Retained earnings Total assets $29,160 Total liabilities and equity Income Statement for December 31, 2019 (Thousands of Dollars) Sales Operating costs Earnings before interest and taxes Interest Receivables Inventories Total current assets Net fixed assets Pre-tax earnings $ 4,320 2,880 0 $36,000 34,000 $ 2,000 160 $ 1,840 460 $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: $ Taxes (25%) Net income 2,100 $9,300 3,500 3,500 12,860 $29,160
Expert Solution
steps

Step by step

Solved in 3 steps with 1 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Cash Flow Statement Analysis
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
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS