Following are the income statement and balance sheet of ADP Inc. DATA PROCESSING INC. Statement of Consolidated Earnings For Year Ended June 30, 2019, $ millions Total revenues $8,505.1 Operating expenses 4,287.5 Systems development and programming costs 381.8 Depreciation and amortization 182.6 Total cost of revenues 4,851.9 Selling, general, and administrative expenses 1,838.5 Interest expense 77.9 Total expenses 6,768.3 Other (income) expense, net (66.7) Earnings before income taxes 1,803.5 Provision for income taxes 427.7 Net earnings $1,375.8 DATA PROCESSING INC. Balance Sheet $ millions June 30, 2019 Current assets Cash and cash equivalents $1,169.5 Accounts receivable, net 1,463.6 Other current assets 311.8 Total current assets before funds held for clients 2,944.9 Funds half for clients 17,660.5 Total current assets 20,605.4 Long-term receivables, net 14.3 Property, plant and equipment, net 458.5 Capitalized contract cost, net 1,457.1 Other assets 560.6 Goodwill 1,393.8 Intangible assets, net 642.9 Total assets $25,132.6 Current liabilities Accounts payable $75.3 Accrued expenses and other current liabilities 1,055.4 Accrued payroll and payroll-related expenses 432.7 Dividends payable 204.1 Short-term deferred revenues 132.4 Obligations under reverse repurchase agreements 157.2 Income taxes payable 32.9 Total current liabilities before client funds obligations 2,090.0 Client funds obligations 17,486.7 Total current liabilities 19,576.7 Long-term debt 1,201.3 Other liabilities 479.2 Deferred income taxes 395.9 Long-term deferred revenues 239.6 Total liabilities 21,892.7 Shareholders' equity Preferred stock, $1.00 par value; Authorized, 0.3 shares; issued , none Common stock, $0.10 par value; Authorized, 1,000.0 shares; issued, 383.2 shares; outstanding 260.5 shares 38.3 Capital in excess of par value 709.9 Retained earnings 10,500.4 Treasury stock, at cost: 122.7 shares (7,854.3) Accumulated other comprehensive loss (154.4) Total stockholders' equity 3,239.9 Total liabilities and stockholders' equity $25,132.6 Assume total revenues grow by 13% in 2020. All other percentages (other than sales growth and provision for income taxes) are based on historic percent of total revenues. CAPEX for 2020 will be 1.1% of total revenue, and depreciation will be $110.6 million. Goodwill, long-term debt, preferred stock, common stock, and Accumulated other comprehensive loss will not change for the year. The company will acquire intangibles equal to 2.9% of total revenues and will record amortization expense of $165.7 million. Income taxes will be 25% of pretax income and income taxes payable will be 7.7% of 2020 tax expense. The company will award $100.4 million of stock-based compensation, which increases Capital in excess of par value by the same amount. Assume that the company routinely includes this form of compensation in operating expenses each year. The company will continue its stock repurchases. DP will repurchase $450 million of treasury stock. Dividends will be $833.60 in 2020, and dividends payable will be 26.3% of dividends. Prepare a forecast of FY2020 statement of cash flows. Note: Round your answers to one decimal place (for example, enter 14.6 for 14.55555). AUTOMATIC DATA PROCESSING, INC. Forecasted Statement of Cash Flows For Year Ended $ millions June 2020 Net income (loss) Add: Depreciation 110.6 Add: Amortization 165.7 Add: Stock based compensation 100.4 Accounts receivable, net -190.3 Other current assets Funds held for clients Long-term receivables, net Capitalized Contract Cost, Net Other assets Accounts payable Accrued expenses and other current liabilities Accrued payroll and payroll-related expenses Short-term deferred revenues Obligations under reverse repurchase agreements Income taxes payable Client funds obligations Other liabilities Deferred income taxes Long-term deferred revenues Operating cash flow Capital Expenditures Additional intangibles acquired Net cash from investing activities Dividends Dividends payable Stock buy backs Net cash from financing activities Net change in cash Beginning cash Ending cash

Following are the income statement and balance sheet of ADP Inc. DATA PROCESSING INC. Statement of Consolidated Earnings For Year Ended June 30, 2019, $ millions Total revenues $8,505.1 Operating expenses 4,287.5 Systems development and programming costs 381.8 Depreciation and amortization 182.6 Total cost of revenues 4,851.9 Selling, general, and administrative expenses 1,838.5 Interest expense 77.9 Total expenses 6,768.3 Other (income) expense, net (66.7) Earnings before income taxes 1,803.5 Provision for income taxes 427.7 Net earnings $1,375.8 DATA PROCESSING INC. Balance Sheet $ millions June 30, 2019 Current assets Cash and cash equivalents $1,169.5 Accounts receivable, net 1,463.6 Other current assets 311.8 Total current assets before funds held for clients 2,944.9 Funds half for clients 17,660.5 Total current assets 20,605.4 Long-term receivables, net 14.3 Property, plant and equipment, net 458.5 Capitalized contract cost, net 1,457.1 Other assets 560.6 Goodwill 1,393.8 Intangible assets, net 642.9 Total assets $25,132.6 Current liabilities Accounts payable $75.3 Accrued expenses and other current liabilities 1,055.4 Accrued payroll and payroll-related expenses 432.7 Dividends payable 204.1 Short-term deferred revenues 132.4 Obligations under reverse repurchase agreements 157.2 Income taxes payable 32.9 Total current liabilities before client funds obligations 2,090.0 Client funds obligations 17,486.7 Total current liabilities 19,576.7 Long-term debt 1,201.3 Other liabilities 479.2 Deferred income taxes 395.9 Long-term deferred revenues 239.6 Total liabilities 21,892.7 Shareholders' equity Preferred stock, $1.00 par value; Authorized, 0.3 shares; issued , none Common stock, $0.10 par value; Authorized, 1,000.0 shares; issued, 383.2 shares; outstanding 260.5 shares 38.3 Capital in excess of par value 709.9 Retained earnings 10,500.4 Treasury stock, at cost: 122.7 shares (7,854.3) Accumulated other comprehensive loss (154.4) Total stockholders' equity 3,239.9 Total liabilities and stockholders' equity $25,132.6 Assume total revenues grow by 13% in 2020. All other percentages (other than sales growth and provision for income taxes) are based on historic percent of total revenues. CAPEX for 2020 will be 1.1% of total revenue, and depreciation will be $110.6 million. Goodwill, long-term debt, preferred stock, common stock, and Accumulated other comprehensive loss will not change for the year. The company will acquire intangibles equal to 2.9% of total revenues and will record amortization expense of $165.7 million. Income taxes will be 25% of pretax income and income taxes payable will be 7.7% of 2020 tax expense. The company will award $100.4 million of stock-based compensation, which increases Capital in excess of par value by the same amount. Assume that the company routinely includes this form of compensation in operating expenses each year. The company will continue its stock repurchases. DP will repurchase $450 million of treasury stock. Dividends will be $833.60 in 2020, and dividends payable will be 26.3% of dividends. Prepare a forecast of FY2020 statement of cash flows. Note: Round your answers to one decimal place (for example, enter 14.6 for 14.55555). AUTOMATIC DATA PROCESSING, INC. Forecasted Statement of Cash Flows For Year Ended $ millions June 2020 Net income (loss) Add: Depreciation 110.6 Add: Amortization 165.7 Add: Stock based compensation 100.4 Accounts receivable, net -190.3 Other current assets Funds held for clients Long-term receivables, net Capitalized Contract Cost, Net Other assets Accounts payable Accrued expenses and other current liabilities Accrued payroll and payroll-related expenses Short-term deferred revenues Obligations under reverse repurchase agreements Income taxes payable Client funds obligations Other liabilities Deferred income taxes Long-term deferred revenues Operating cash flow Capital Expenditures Additional intangibles acquired Net cash from investing activities Dividends Dividends payable Stock buy backs Net cash from financing activities Net change in cash Beginning cash Ending cash

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter9: Long-term Liabilities

Section: Chapter Questions

Problem 103.2C

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Analyze, Forecast, and Interpret Income Statement and Balance Sheet
Following are the income statement and balance sheet of ADP Inc.

DATA PROCESSING INC.
Statement of Consolidated Earnings
For Year Ended June 30, 2019, $ millions
Total revenues	$8,505.1
Operating expenses	4,287.5
Systems development and programming costs	381.8
Depreciation and amortization	182.6
Total cost of revenues	4,851.9
Selling, general, and administrative expenses	1,838.5
Interest expense	77.9
Total expenses	6,768.3
Other (income) expense, net	(66.7)
Earnings before income taxes	1,803.5
Provision for income taxes	427.7
Net earnings	$1,375.8

DATA PROCESSING INC.
Balance Sheet
$ millions	June 30, 2019
Current assets
Cash and cash equivalents	$1,169.5
Accounts receivable, net	1,463.6
Other current assets	311.8
Total current assets before funds held for clients	2,944.9
Funds half for clients	17,660.5
Total current assets	20,605.4
Long-term receivables, net	14.3
Property, plant and equipment, net	458.5
Capitalized contract cost, net	1,457.1
Other assets	560.6
Goodwill	1,393.8
Intangible assets, net	642.9
Total assets	$25,132.6
Current liabilities
Accounts payable	$75.3
Accrued expenses and other current liabilities	1,055.4
Accrued payroll and payroll-related expenses	432.7
Dividends payable	204.1
Short-term deferred revenues	132.4
Obligations under reverse repurchase agreements	157.2
Income taxes payable	32.9
Total current liabilities before client funds obligations	2,090.0
Client funds obligations	17,486.7
Total current liabilities	19,576.7
Long-term debt	1,201.3
Other liabilities	479.2
Deferred income taxes	395.9
Long-term deferred revenues	239.6
Total liabilities	21,892.7
Shareholders' equity
Preferred stock, $1.00 par value; Authorized, 0.3 shares; issued , none
Common stock, $0.10 par value; Authorized, 1,000.0 shares;
issued, 383.2 shares; outstanding 260.5 shares	38.3
Capital in excess of par value	709.9
Retained earnings	10,500.4
Treasury stock, at cost: 122.7 shares	(7,854.3)
Accumulated other comprehensive loss	(154.4)
Total stockholders' equity	3,239.9
Total liabilities and stockholders' equity	$25,132.6

Assume total revenues grow by 13% in 2020. All other percentages (other than sales growth and provision for income taxes) are based on historic percent of total revenues.

CAPEX for 2020 will be 1.1% of total revenue, and depreciation will be $110.6 million.
Goodwill, long-term debt, preferred stock, common stock, and Accumulated other comprehensive loss will not change for the year.
The company will acquire intangibles equal to 2.9% of total revenues and will record amortization expense of $165.7 million.
Income taxes will be 25% of pretax income and income taxes payable will be 7.7% of 2020 tax expense.
The company will award $100.4 million of stock-based compensation, which increases Capital in excess of par value by the same amount. Assume that the company routinely includes this form of compensation in operating expenses each year.
The company will continue its stock repurchases. DP will repurchase $450 million of treasury stock.
Dividends will be $833.60 in 2020, and dividends payable will be 26.3% of dividends.

Prepare a forecast of FY2020 statement of cash flows.
Note: Round your answers to one decimal place (for example, enter 14.6 for 14.55555).

AUTOMATIC DATA PROCESSING, INC.
Forecasted Statement of Cash Flows
For Year Ended
$ millions	June 2020
Net income (loss)
Add: Depreciation	110.6
Add: Amortization	165.7
Add: Stock based compensation	100.4
Accounts receivable, net	-190.3
Other current assets
Funds held for clients
Long-term receivables, net
Capitalized Contract Cost, Net
Other assets
Accounts payable
Accrued expenses and other current liabilities
Accrued payroll and payroll-related expenses
Short-term deferred revenues
Obligations under reverse repurchase agreements
Income taxes payable
Client funds obligations
Other liabilities
Deferred income taxes
Long-term deferred revenues
Operating cash flow
Capital Expenditures
Additional intangibles acquired
Net cash from investing activities
Dividends
Dividends payable
Stock buy backs
Net cash from financing activities
Net change in cash
Beginning cash
Ending cash

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