Adjust the Cash BalanceWe obtain the following 2020 forecasts of selected financial statement line items for Journey Company.2019Actual 2020 Est.$535,667 $559,77250,725 46,945261,998 233,17838,688 38,68843,618(11,270)(41,323)$ millionsNet SalesMarketable securitiesLong-term debtTreasury stock (deducted from equity)Cash generated by operationsCash used for investingCash used for financingTotal net change in cashCash at beginning of periodCash at end of periodNote: Complete the entire question in Excel using the following template: Excel Template. Format each answer to two decimal places. Then enter the answers into the provided spaces below with two decimal places.a. Does forecasted cash deviate from the normal level for this company?Calculate the company's normal cash level as a percentage of sales.Normal cash as a % of sales0%$Using the answer above, compute what should be the normal cash balance for FY2020.Normal cash balance for FY20200b. Is the deviation in part a large enough to require adjustment? Explain.(8,975)38,663$29,688c. Identify three ways to adjust the forecasted cash balance.Which option would least likely be used to adjust the cash balance?Sell marketable securitiesDecrease capital expendituresIncrease long-term debtSell treasury stockCash used for financingnt of cash flows assuming long-term debt is used to adjust the forecasted cash balance.000 d. Complete the following statement of cash flows assuming long-term debt is used to adjust the forecasted cash balance.Statement of Cash FlowsCash generated by operations $Cash used for investingCash used for financingTotal change in cashCash at beginning of periodCash at end of period$0$OO000O O00e. Complete the following statement of cash flows assuming marketable securities are used to adjust the forecasted cash balance.Statement of Cash FlowsCash generated by operations $Cash used for investingCash used for financingTotal change in cashCash at beginning of periodCash at end of period000000Please answer all parts of the question.

"Since you have asked a question with sub-parts more than three, as per guidelines, the first three sub-parts are answered for you. If you want the remaining sub-parts to be answered, please post the remaining sub-parts separately".Cash Flow Statement:The cash flow statement is prepared at the end of the period to know the cash position. It reflects all cash inflows and outflows and also which activities generated cash and which activities used cash. The important thing is that a business must generate cash from operating activities. The statement of cash flow can be prepared using either direct or indirect method. (1) Calculate the company's normal cash level as a percentage of sales: Particulars Amount ($ millions) Cash at beginning of period (a) 38,663Net Sales (2019 Actual) (b) 535,667Company's normal cash level as a percentage of sales (a / b)7.2%(2) Compute what should be the normal cash balance for FY2020: Particulars Amount ($ millions) Company's normal cash level as a percentage of sales (a)7.2%Estimated sales for 2020 (b) 559,772Normal cash balance for FY2020 (a x b) 40,403Step 1: Determine the deviation in percentage terms: Particulars Amount ($ millions) Normal cash balance for FY2020 (a) 40,403Forecasted cash balance for FY2020 (b) 29,688Increase in normal cash balance (c = a - b) 10,715Percentage of increase (c / a)26.52%Step 2: Determine if the deviation in part a large enough to require adjustment:Yes, the deviation is a significant percentage of the historical cash balance.The following are the three ways to adjust the forecasted cash balance:(1) Sell marketable securities. (2) Increase long-term debt by that amount, or(3) Sell some treasury stock on the open market.The firm is likely to take these actions before decreasing capital expenditures.(a) Normal cash level as a percentage of sales - 7.2%. Normal cash balance for FY2020 - $40,403(b) Yes. The deviation is large enough to require an adjustment. (c) The following are the three ways to adjust the forecasted cash balance: (1) Sell marketable securities. (2) Increase long-term debt by that amount, or (3) Sell some treasury stock on the open market. The firm is likely to take these actions before decreasing capital expenditures.

Business

Accounting

We obtain the following 2020 forecasts of selected financial statement line items for Journey Company. 2019 Actual 2020 Est. $535,667 $559,772 50,725 46,945 261,998 233,178 38,688 38,688 43,618 (11,270) (41,323) $ millions Net Sales Marketable securities Long-term debt Treasury stock (deducted from equity) Cash generated by operations Cash used for investing Cash used for financing Total net change in cash Cash at beginning of period Cash at end of period (8,975) 38,663 $29,688

We obtain the following 2020 forecasts of selected financial statement line items for Journey Company. 2019 Actual 2020 Est. $535,667 $559,772 50,725 46,945 261,998 233,178 38,688 38,688 43,618 (11,270) (41,323) $ millions Net Sales Marketable securities Long-term debt Treasury stock (deducted from equity) Cash generated by operations Cash used for investing Cash used for financing Total net change in cash Cash at beginning of period Cash at end of period (8,975) 38,663 $29,688

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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Question

Adjust the Cash Balance
We obtain the following 2020 forecasts of selected financial statement line items for Journey Company.
2019
Actual 2020 Est.
$535,667 $559,772
50,725 46,945
261,998 233,178
38,688 38,688
43,618
(11,270)
(41,323)
$ millions
Net Sales
Marketable securities
Long-term debt
Treasury stock (deducted from equity)
Cash generated by operations
Cash used for investing
Cash used for financing
Total net change in cash
Cash at beginning of period
Cash at end of period
Note: Complete the entire question in Excel using the following template: Excel Template. Format each answer to two decimal places. Then enter the answers into the provided spaces below with two decimal places.
a. Does forecasted cash deviate from the normal level for this company?
Calculate the company's normal cash level as a percentage of sales.
Normal cash as a % of sales
0%
$
Using the answer above, compute what should be the normal cash balance for FY2020.
Normal cash balance for FY2020
0
b. Is the deviation in part a large enough to require adjustment? Explain.
(8,975)
38,663
$29,688
c. Identify three ways to adjust the forecasted cash balance.
Which option would least likely be used to adjust the cash balance?
Sell marketable securities
Decrease capital expenditures
Increase long-term debt
Sell treasury stock
Cash used for financing
nt of cash flows assuming long-term debt is used to adjust the forecasted cash balance.
0
0
0

d. Complete the following statement of cash flows assuming long-term debt is used to adjust the forecasted cash balance.
Statement of Cash Flows
Cash generated by operations $
Cash used for investing
Cash used for financing
Total change in cash
Cash at beginning of period
Cash at end of period
$
0
$
OO
0
0
0
O O
0
0
e. Complete the following statement of cash flows assuming marketable securities are used to adjust the forecasted cash balance.
Statement of Cash Flows
Cash generated by operations $
Cash used for investing
Cash used for financing
Total change in cash
Cash at beginning of period
Cash at end of period
0
0
0
0
0
0
Please answer all parts of the question.

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