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Income Statement (2017) 1.500 Balance Sheet (2017) Accounts Payable ? Short-Term Debt ? Long-Term Debt 2.092 Common Stock Retained Earnings 1.132 Total Credit Sales Cash Accounts Receivable Inventory Fixed Assets Cost of Goods Sold 125 Taxable Income ? 845 845 Taxes (34%) Net Income Total ? Dividend (33.33%) Retained Earnings Main assumptions: Sales has increased by 25% in 2017. "Cost of goods sold" is 80% of sales in the income statement at all times. All other items are independent of sales. Each current asset and accounts payable are fractions of sales in the balance sheet. All other items are independent of sales. Current ratio is 3, acoounts receivable turnover is 2, inventory turnover is 4, accounts payable turnover is 5 at all times. Turnovers are calculated with respect to the current period balances without averaging with past year balances. Throughout the year 2017: o the company raised funds through short-term debt first. o the company raised the remaining funds through 50% long-term debt and 50% equity offering (common stock). Suppose that the company wants to double each turnover rates in year 2018. With this improvement, the company would like to pay some of its short-term and long- term debts. Assuming that all main assumptions are still valid in 2018 except for the fund raising activities (the last two bullets), what would be the total debt in the 2018 balance sheet?

Income Statement (2017) 1.500 Balance Sheet (2017) Accounts Payable ? Short-Term Debt ? Long-Term Debt 2.092 Common Stock Retained Earnings 1.132 Total Credit Sales Cash Accounts Receivable Inventory Fixed Assets Cost of Goods Sold 125 Taxable Income ? 845 845 Taxes (34%) Net Income Total ? Dividend (33.33%) Retained Earnings Main assumptions: Sales has increased by 25% in 2017. "Cost of goods sold" is 80% of sales in the income statement at all times. All other items are independent of sales. Each current asset and accounts payable are fractions of sales in the balance sheet. All other items are independent of sales. Current ratio is 3, acoounts receivable turnover is 2, inventory turnover is 4, accounts payable turnover is 5 at all times. Turnovers are calculated with respect to the current period balances without averaging with past year balances. Throughout the year 2017: o the company raised funds through short-term debt first. o the company raised the remaining funds through 50% long-term debt and 50% equity offering (common stock). Suppose that the company wants to double each turnover rates in year 2018. With this improvement, the company would like to pay some of its short-term and long- term debts. Assuming that all main assumptions are still valid in 2018 except for the fund raising activities (the last two bullets), what would be the total debt in the 2018 balance sheet?

College Accounting, Chapters 1-27
College Accounting, Chapters 1-27
23rd Edition
ISBN:9781337794756
Author:HEINTZ, James A.
Publisher:HEINTZ, James A.
Chapter15: Financial Statements And Year-end Accounting For A Merchandising Business
Section: Chapter Questions
Problem 4SEA: FINANCIAL RATIOS Based on the financial statements for Jackson Enterprises (income statement,...
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Income Statement (2017) Credit Sales Cost of Goods Sold Balance Sheet (2017) 1.500 Cash ? Accounts Payable ? Accounts Receivable Short-Term Debt 125 Long-Term Debt 2.092 Common Stock Retained Earnings 1.132 Taxable Income Inventory Fixed Assets ? 845 Taxes (34%) Net Income 845 Total ? Total ? Dividend (33.33%) Retained Earnings ? Main assumptions: Sales has increased by 25% in 2017. "Cost of goods sold is 80% of sales in the income statement at all times. All other items are independent of sales. Each current asset and accounts payable are fractions of sales in the balance sheet. All other items are independent of sales. Current ratio is 3, accounts receivable turnover is 2, inventory turnover is 4, accounts payable turnover is 5 at all times. Turnovers are calculated with respect to the current period balances without averaging with past year balances. Throughout the year 2017: o the company raised funds through short-term debt first. o the company raised the remaining funds through 50% long-term debt and 50% equity offering (common stock). Suppose that the company wants to double each turnover rates in year 2018. With this improvement, the company would like to pay some of its short-term and long- term debts. Assuming that all main assumptions are still valid in 2018 except for the fund raising activities (the last two bullets), what would be the total debt in the 2018 balance sheet?
Transcribed Image Text:Income Statement (2017) Credit Sales Cost of Goods Sold Balance Sheet (2017) 1.500 Cash ? Accounts Payable ? Accounts Receivable Short-Term Debt 125 Long-Term Debt 2.092 Common Stock Retained Earnings 1.132 Taxable Income Inventory Fixed Assets ? 845 Taxes (34%) Net Income 845 Total ? Total ? Dividend (33.33%) Retained Earnings ? Main assumptions: Sales has increased by 25% in 2017. "Cost of goods sold is 80% of sales in the income statement at all times. All other items are independent of sales. Each current asset and accounts payable are fractions of sales in the balance sheet. All other items are independent of sales. Current ratio is 3, accounts receivable turnover is 2, inventory turnover is 4, accounts payable turnover is 5 at all times. Turnovers are calculated with respect to the current period balances without averaging with past year balances. Throughout the year 2017: o the company raised funds through short-term debt first. o the company raised the remaining funds through 50% long-term debt and 50% equity offering (common stock). Suppose that the company wants to double each turnover rates in year 2018. With this improvement, the company would like to pay some of its short-term and long- term debts. Assuming that all main assumptions are still valid in 2018 except for the fund raising activities (the last two bullets), what would be the total debt in the 2018 balance sheet?
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