1. Technology Corporation increased its sales from $375,000 in 2012 to $ 450,000 in2013 as shown in the firm's income statements presented below. LaAnn Sands, CEO and founder of the firm, expressed concern that the cash account and the firm's cash de- clined substantially between 2012 and 2013. Salza's complete balance sheets are also shown. Ms. Sands is seeking your assistance in the preparation of a statement of cash flows for Salza Technology. SALZA TECHNOLOGY CORPORATION ANNUAL INCOME STATEMENT (IN $ THOUSANDS) 2012 2013 Net sales $375 $450 Less: Cost of goods sold -225 -270 Gross profit 150 180 Less: Operating expenses -46 -46 Less: Depreciation -25 -30 Less: Interest -4 -4 Income before taxes 75 100 Less: Income taxes -20 -30 Net income $ 55 $ 70 Cash dividends $17 $20 BALANCE SHEETS AS OF DECEMBER 31 (IN $ THOUSANDS) 2012 2013 Cash $ 39 $ 16 Accounts receivables 50 80 Inventories 151 204 Total current assets 240 300 Gross fixed assets 200 290 Less: accumulated depreciation -95 -125 Net fixed assets 105 165 Total assets $ 345 $ 465 Account payable $ 30 $ 45 Bank loan 20 27 Accrued liabilities 10 23 Total current liabilities 60 95 Long-term debt 15 15 Common stock 85 120 Retained earnings 185 235 Total liabilities and equity $ 345 $ 465

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter4: Preparing And Using Financial Statements

Section: Chapter Questions

Problem 8EP

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LaAnn Sands wants to conduct revenue breakeven analyses of Salza Technology Corporation for 2013. For 2013, the firm’s cost of goods sold is considered to be variable costs, and operating expenses are considered to be fixed cash costs. Depreciation expenses in 2013 are expected to be fixed costs. Interest expenses in 2013 are expected to be fixed costs. Calculate Salza’s EBDAT breakeven in terms of survival revenues for 2013.
LeAnn Sands has reason to believe that 2014 will be a replication of 2013 except that cost of goods sold is expected to be 65 percent of the estimated $ 450,000 in revenues. Other income statement relationships are expected to remain the same in 2014 as they were in 2013. Calculate the EBDAT breakeven point for 2014 for Salza in terms of survival revenues.

1.
Technology Corporation increased its sales from $375,000 in 2012 to $ 450,000
in2013 as shown in the firm's income statements presented below. LaAnn Sands, CEO
and founder of the firm, expressed concern that the cash account and the firm's cash de-
clined substantially between 2012 and 2013. Salza's complete balance sheets are also
shown. Ms. Sands is seeking your assistance in the preparation of a statement of cash
flows for Salza Technology.
SALZA TECHNOLOGY CORPORATION ANNUAL INCOME STATEMENT (IN $ THOUSANDS)
2012
2013
Net sales
$375
$450
Less: Cost of goods sold
-225
-270
Gross profit
150
180
Less: Operating expenses
-46
-46
Less: Depreciation
-25
-30
Less: Interest
-4
-4
Income before taxes
75
100
Less: Income taxes
-20
-30
Net income
$ 55
$ 70
Cash dividends
$17
$20

BALANCE SHEETS AS OF DECEMBER 31 (IN $ THOUSANDS)
2012
2013
Cash
$ 39
$ 16
Accounts receivables
50
80
Inventories
151
204
Total current assets
240
300
Gross fixed assets
200
290
Less: accumulated depreciation
-95
-125
Net fixed assets
105
165
Total assets
$ 345
$ 465
Account payable
$ 30
$ 45
Bank loan
20
27
Accrued liabilities
10
23
Total current liabilities
60
95
Long-term debt
15
15
Common stock
85
120
Retained earnings
185
235
Total liabilities and equity
$ 345
$ 465

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