Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN: 9781337395083
Author: Eugene F. Brigham, Phillip R. Daves
Publisher: Cengage Learning
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Textbook Question
Chapter 9, Problem 8P
Financing Deficit
Stevens Textile Corporation’s 2018 financial statements are shown here:
Income Statement for December 31, 2018 (Thousands of Dollars)
- a. Suppose 2019 sales are projected to increase by 15% over 2018 sales. Use the
forecasted financial statement method to forecast a balance sheet and income statement for December 31, 2019. The interest rate on all debt is 10%, and cash earns no interest income. Assume that all additional debt in the form of a 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 theforecasted income statement to determine the addition toretained earnings . Assume that the company was operating at full capacity in 2018, that it cannot sell off any of its fixed assets, and that any required financing will be borrowed as notes payable. Also, assume that assets, spontaneous liabilities, and operating costs are expected to increase by the same percentage as sales. Determine the additional funds needed. - b. What is the resulting total forecasted amount of the line of credit?
- c. In your answers to parts a and b, you should not have charged any interest on the additional debt added during 2019 because it was assumed that the new debt was added at the end of the year. But now suppose that the new debt is added throughout the year. Don’t do any calculations, but how would this change the answers to parts a and b?
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REQUIRED
Use the following information provided by Ashton Enterprises to prepare the:
Debtors Collection Schedule for January and February 2021.
5.1
5.2
Cash Budget for January and February 2021.
Note: Where applicable, round off amounts to the nearest Rand.
INFORMATION
1.
The bank balance on 31 December 2020 is expected to be R40 000 (favourable).
2.
Expected credit sales are as follows:
December 2020
January 2021
February 2021
R360 000
R390 000
R420 000
3.
Credit sales usually make up 60% of the total sales. Cash sales make up the balance.
Credit sales are normally collected as follows:
20% in the month in which the transaction took place. These debtors are entitled to a 5% discount.
4.
75% in the following month.
The rest is usually written off as bad debts.
Prepare the debtors collection period for the four quarters of 2021
Use the information provided below to prepare the following for January and February 2023:
4.1
Debtors Collection Schedule
4.2
5.
6.
7.
8.
9.
10.
INFORMATION
The following information was provided by Intel Enterprises:
1.
2.
Cash Budget
3.
4.
The bank balance on 31 December 2022 is expected to be R40 000 (unfavourable).
Credit sales are expected to be as follows:
December 2022
R576 000
Credit sales are normally collected as follows:
65% in the following month
January 2023
Credit sales usually make up 40% of the total sales. Cash sales make up the balance. Cash customers
receive a 10% discount.
The rest is usually written off as bad debts.
R540 000
* 30% in the month in which the transaction takes place, and these customers are entitled to a 5% discount.
December 2022
Budgeted purchases of inventory are as follows:
R1 000 000
February 2023
January 2023
R648 000
R800 000
February 2023
R920 000
Fifty percent (50%) of the purchases are for cash. The remainder is paid in the month after the…
Chapter 9 Solutions
Intermediate Financial Management (MindTap Course List)
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Ch. 9 - Long-Term Financing Needed At year-end 2018,...Ch. 9 - Additional Funds Needed
The Booth Company’s sales...Ch. 9 - Forecasted Statements and Ratios Upton Computers...Ch. 9 - Financing Deficit
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