ASSETS 2020 2019 ASSETS 2020 2019 29,000 25,000 116,000 100,000 145,000 125,000 290,000 250,000 362,000 350,000 130,000 100,000 232,000 250,000 ASH AND MARKETABLE SECURITIES CCOUNTS RECEIVABLE NVENTORIES CURRENT ASSETS GROSS PLANT AND EQUIPMENT LESS: ACCUMULATED DEPRECIATION NET FIXED ASSETS TOTAL ASSETS 522000 500.000
ASSETS 2020 2019 ASSETS 2020 2019 29,000 25,000 116,000 100,000 145,000 125,000 290,000 250,000 362,000 350,000 130,000 100,000 232,000 250,000 ASH AND MARKETABLE SECURITIES CCOUNTS RECEIVABLE NVENTORIES CURRENT ASSETS GROSS PLANT AND EQUIPMENT LESS: ACCUMULATED DEPRECIATION NET FIXED ASSETS TOTAL ASSETS 522000 500.000
Chapter7: Common Stock: Characteristics, Valuation, And Issuance
Section: Chapter Questions
Problem 8P
Related questions
Question
![Farnsbeck Inc. is forecasting a 15% increase in sales next year. Assume the company is operating at 85%
capacity. The company has 50,000 shares of common stock outstanding. The firm will pay out 60% of its Net
Income in dividends and move 40% into retained earnings
Based on the Income statement and balance sheet below answer the following questions.
ASSETS
2020
2019
ASSETS
2020
2019
CASH AND MARKETABLE SECURITIES
ACCOUNTS RECEIVABLE
INVENTORIES
25,000
116,000 100,000
145,000 125,000
290,000 250,000
362,000 350,000
29,000
CURRENT ASSETS
GROSS PLANT AND EQUIPMENT
130,000 100,000
232,000 250,000
TOTAL ASSETS 522,000 500,000
LESS: ACCUMULATED DEPRECIATION
NET FIXED ASSETS
LIABILITIES AND EQUITY
90,480
78,000
ACCOUNTS PAYABLE
ACCRURALS
NOTES PAYABLE
30,000
34,000
CURRENT LAIBILITIES 150,700 142,000
145,000 140,000
TOTAL LIABILITIES 295,700 282,000
150,000 150,000
34,800
25,420
LONG TERM DEBT
COMMON STOCK ($1.00 par)
76,300
68,000
RETAINED EARNINGS
TOTAL OWNER'S EQUITY 226,300 218,000
TOTAL LIABILITIES AND EQUITY 522,000 500,000
INCOME STATEMENT
2020
2019
NET REVENUES & SALES (100,000 UNITS)
COST OF GOODS SOLD
GROSS PROFIT
FIXED OPERATING EXPENSES (pre depreciation)
EBITDA Earnings before Intrest, Taxes, Dep & Amorit
DEPRECIATION EXPENSE
OPERATING INCOME (EBIT)
INTEREST
INCOME BEFORE TAXES (EBT)
INCOME TAXES (40%)
NET INCOME
div
812,000 700,000
522,000 450,000
290,000 250,000
174,200 151,000
115,800 99,000
30,000- 25,000
85,800
14,500
71,300
74,000
14,000
60,000
24,000
28,520
36,000
28,500
7,500
42,780
34,480
Retained Earnings 8,300
NUMBER OF SHARES OUTSTANDING
50,000
50,000
At 85% capacity what level will sales have to reach for the discretionary items to become spontaneous, that is
move in direct proportion to sales? ISelect ]
Compute the new level of net income for the company [Select|
Compute the company's additional retained earnings for the year [ Select]
Compute the new level of total assets required [Select)
Calculate the new level of current liabilities [Select]
Compute the company's new level of retained earnings on the balance sheet (Select]
Calculate the level of Additional Funds Needed (AFN) to support the increase in sales
(Select)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd9141896-001f-4e78-8572-207ee29bce3c%2F0d60c1bd-04a6-4f9f-bd29-a1ea770f18f9%2F4pus0hr_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Farnsbeck Inc. is forecasting a 15% increase in sales next year. Assume the company is operating at 85%
capacity. The company has 50,000 shares of common stock outstanding. The firm will pay out 60% of its Net
Income in dividends and move 40% into retained earnings
Based on the Income statement and balance sheet below answer the following questions.
ASSETS
2020
2019
ASSETS
2020
2019
CASH AND MARKETABLE SECURITIES
ACCOUNTS RECEIVABLE
INVENTORIES
25,000
116,000 100,000
145,000 125,000
290,000 250,000
362,000 350,000
29,000
CURRENT ASSETS
GROSS PLANT AND EQUIPMENT
130,000 100,000
232,000 250,000
TOTAL ASSETS 522,000 500,000
LESS: ACCUMULATED DEPRECIATION
NET FIXED ASSETS
LIABILITIES AND EQUITY
90,480
78,000
ACCOUNTS PAYABLE
ACCRURALS
NOTES PAYABLE
30,000
34,000
CURRENT LAIBILITIES 150,700 142,000
145,000 140,000
TOTAL LIABILITIES 295,700 282,000
150,000 150,000
34,800
25,420
LONG TERM DEBT
COMMON STOCK ($1.00 par)
76,300
68,000
RETAINED EARNINGS
TOTAL OWNER'S EQUITY 226,300 218,000
TOTAL LIABILITIES AND EQUITY 522,000 500,000
INCOME STATEMENT
2020
2019
NET REVENUES & SALES (100,000 UNITS)
COST OF GOODS SOLD
GROSS PROFIT
FIXED OPERATING EXPENSES (pre depreciation)
EBITDA Earnings before Intrest, Taxes, Dep & Amorit
DEPRECIATION EXPENSE
OPERATING INCOME (EBIT)
INTEREST
INCOME BEFORE TAXES (EBT)
INCOME TAXES (40%)
NET INCOME
div
812,000 700,000
522,000 450,000
290,000 250,000
174,200 151,000
115,800 99,000
30,000- 25,000
85,800
14,500
71,300
74,000
14,000
60,000
24,000
28,520
36,000
28,500
7,500
42,780
34,480
Retained Earnings 8,300
NUMBER OF SHARES OUTSTANDING
50,000
50,000
At 85% capacity what level will sales have to reach for the discretionary items to become spontaneous, that is
move in direct proportion to sales? ISelect ]
Compute the new level of net income for the company [Select|
Compute the company's additional retained earnings for the year [ Select]
Compute the new level of total assets required [Select)
Calculate the new level of current liabilities [Select]
Compute the company's new level of retained earnings on the balance sheet (Select]
Calculate the level of Additional Funds Needed (AFN) to support the increase in sales
(Select)
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