ECL Corporation recently reported the the following 2019 balance sheet and 2019 income statement (in pesos):For the coming year, the company's CFO has assembled this information:- The company is forecasting a 25% increase in sales- It expects that its cost of goods sold, operating expenses, assets and current liabilities will increase at the same rate as sales- Interest expense, long term debt and capital stock are expected to remain constant.-Tax rate is expected to remain at 30%.- No dividends will be declared.Prepare the statement of cash flows for the year 2020 using the percent of sales method (estimation method)ECL CORPORATION BALANCE SHEET DECEMBER 31, 2019 ASSETS CURRENT ASSETS CASH 114,690 ACCOUNTS RECEIVABLE 1,000 INVENTORY 1,000TOTAL CURRENT ASSETS 116,690 FIXED ASSETS NET FIXED ASSETS 40,000 TOTAL ASSETS 156,690 LIABILITIES CURRENT LIABILITIES ACCOUNTS PAYABLE 2,000 NOTES PAYABLE TOTAL CURRENT LIABILITIES 2,000 LONG TERM DEBT 13,000 TOTAL LIABILITIES 15,000 STOCKHOLDERS' EQUITY CAPITAL STOCK 60,000 RETAINED EARNINGS, BEGINNING 32,130 ADD: NET INCOME (LOSS) 49,560 LESS: DIVIDENDS- RETAINED EARNINGS, END 81,690 TOTAL STOCKHOLDERS EQUITY 141,690 TOTAL LIABILITIES AND STOCKHOLDERS EQUITY 156,690 ECL CORPORATION INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2019 SALES (NET)200,000COST OF GOODS SOLD100,000GROSS PROFIT100,000LESS: OPERATING EXPENSES SALARIES12,000 GASOLINE/TRAVEL2,000 UTILITIES4,000 DEPRECIATION10,000TOTAL OPERATING EXPENSES28,000INCOME (LOSS) FROM OPERATIONS72,000LESS: INTEREST1,200INCOME BEFORE TAXES70,800LESS: TAXES (30%)21,240NET INCOME AFTER TAXES49,560 ECL CORPORATION PROJECTED INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2020 SALES (NET)250,000COST OF GOODS SOLD125,000GROSS PROFIT125,000LESS: OPERATING EXPENSES SALARIES15,000 GASOLINE/TRAVEL2,500 UTILITIES5,000 DEPRECIATION12,500TOTAL OPERATING EXPENSES35,000INCOME (LOSS) FROM OPERATIONS90,000LESS: INTEREST1,200INCOME BEFORE TAXES88,800LESS: TAXES (30%)26,640NET INCOME AFTER TAXES62,160 ECL CORPORATION PROJECTED BALANCE SHEET DECEMBER 31, 2020 ASSETS CURRENT ASSETS CASH 143,362.50 MARKETABLE SECURITIES 23,487.50 ACCOUNTS RECEIVABLE 1,250 INVENTORY 1,250TOTAL CURRENT ASSETS 169,350 FIXED ASSETS NET FIXED ASSETS 50,000 TOTAL ASSETS 219,350 LIABILITIES CURRENT LIABILITIES ACCOUNTS PAYABLE 2,500 NOTES PAYABLE-TOTAL CURRENT LIABILITIES 2,500 LONG TERM DEBT 13,000 TOTAL LIABILITIES 15,500 STOCKHOLDERS' EQUITY CAPITAL STOCK 60,000 RETAINED EARNINGS, BEGINNING 81,690 ADD: NET INCOME (LOSS) 62,160 LESS: DIVIDENDS- RETAINED EARNINGS, END 143,850 TOTAL STOCKHOLDERS EQUITY 203,850 TOTAL LIABILITIES AND STOCKHOLDERS EQUITY 219,350 ECL CORPORATIÓNPROJECTED STATEMENT OF CASH FLOWSFOR THE YEAR ENDING DECEMBER 31, 2020(IN PESOS)Cash Flow From Operating ActivitiesNet Income After TaxAdd: Depreciation ExpenseIncrease (decrease) in Accounts Receivable-(+)Increase (decrease) in Inventories-(+)Increase (decrease) in Other Current Assets-(+)Increase (decrease) in Accounts Payable+(-)Increase (decrease) in Accruals+(-)Increase (decrease) in Other Current Liabilities+(-)Total Cash Flow from Operating ActivitiesCash Flow From Investing ActivitiesIncrease (decrease) in Gross Fixed Assets-(+)Increase (decrease) in Investments|-(+)Total Cash Flow From Investing ActivitiesCash Flow From Financing ActivitiesIncrease (decrease) in Short Term Debt+(-)Increase (decrease) in Long Term Debt+(-)Increase (decrease) in Capital Stock+(-)Dividends Paid (Withdrawals)(-)Total Cash Flow From Financing ActivitiesChange In CashAdd: Cash Beginning (January 1, 2020)Equals Cash Ending (December 31, 2020)

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Cornerstones of Financial Accounting

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ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter11: The Statement Of Cash Flows

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Problem 27BE

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Question

ECL Corporation recently reported the the following 2019 balance sheet and 2019 income statement (in pesos):

For the coming year, the company's CFO has assembled this information:

- The company is forecasting a 25% increase in sales

- It expects that its cost of goods sold, operating expenses, assets and current liabilities will increase at the same rate as sales

- Interest expense, long term debt and capital stock are expected to remain constant.

-Tax rate is expected to remain at 30%.

- No dividends will be declared.

Prepare the statement of cash flows for the year 2020 using the percent of sales method (estimation method)

ECL CORPORATION
BALANCE SHEET
DECEMBER 31, 2019

ASSETS
CURRENT ASSETS
CASH	114,690
ACCOUNTS RECEIVABLE	1,000
INVENTORY	1,000
TOTAL CURRENT ASSETS	116,690

FIXED ASSETS
NET FIXED ASSETS	40,000

TOTAL ASSETS	156,690

LIABILITIES
CURRENT LIABILITIES
ACCOUNTS PAYABLE	2,000
NOTES PAYABLE
TOTAL CURRENT LIABILITIES	2,000

LONG TERM DEBT	13,000

TOTAL LIABILITIES	15,000

STOCKHOLDERS' EQUITY
CAPITAL STOCK	60,000

RETAINED EARNINGS, BEGINNING	32,130
ADD: NET INCOME (LOSS)	49,560
LESS: DIVIDENDS	-
RETAINED EARNINGS, END	81,690

TOTAL STOCKHOLDERS EQUITY	141,690
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY	156,690

ECL CORPORATION
INCOME STATEMENT
FOR THE YEAR ENDED	DECEMBER 31, 2019

SALES (NET)	200,000
COST OF GOODS SOLD	100,000
GROSS PROFIT	100,000
LESS: OPERATING EXPENSES
SALARIES	12,000
GASOLINE/TRAVEL	2,000
UTILITIES	4,000
DEPRECIATION	10,000
TOTAL OPERATING EXPENSES	28,000
INCOME (LOSS) FROM OPERATIONS	72,000
LESS: INTEREST	1,200
INCOME BEFORE TAXES	70,800
LESS: TAXES (30%)	21,240
NET INCOME AFTER TAXES	49,560

ECL CORPORATION
PROJECTED INCOME STATEMENT
FOR THE YEAR ENDED	DECEMBER 31, 2020

SALES (NET)	250,000
COST OF GOODS SOLD	125,000
GROSS PROFIT	125,000
LESS: OPERATING EXPENSES
SALARIES	15,000
GASOLINE/TRAVEL	2,500
UTILITIES	5,000
DEPRECIATION	12,500
TOTAL OPERATING EXPENSES	35,000
INCOME (LOSS) FROM OPERATIONS	90,000
LESS: INTEREST	1,200
INCOME BEFORE TAXES	88,800
LESS: TAXES (30%)	26,640
NET INCOME AFTER TAXES	62,160

ECL CORPORATION
PROJECTED BALANCE SHEET
DECEMBER 31, 2020

ASSETS
CURRENT ASSETS
CASH	143,362.50
MARKETABLE SECURITIES	23,487.50
ACCOUNTS RECEIVABLE	1,250
INVENTORY	1,250
TOTAL CURRENT ASSETS	169,350

FIXED ASSETS
NET FIXED ASSETS	50,000

TOTAL ASSETS	219,350

LIABILITIES
CURRENT LIABILITIES
ACCOUNTS PAYABLE	2,500
NOTES PAYABLE	-
TOTAL CURRENT LIABILITIES	2,500

LONG TERM DEBT	13,000

TOTAL LIABILITIES	15,500

STOCKHOLDERS' EQUITY
CAPITAL STOCK	60,000

RETAINED EARNINGS, BEGINNING	81,690
ADD: NET INCOME (LOSS)	62,160
LESS: DIVIDENDS	-
RETAINED EARNINGS, END	143,850

TOTAL STOCKHOLDERS EQUITY	203,850
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY	219,350

ECL CORPORATIÓN
PROJECTED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDING DECEMBER 31, 2020
(IN PESOS)
Cash Flow From Operating Activities
Net Income After Tax
Add: Depreciation Expense
Increase (decrease) in Accounts Receivable
-(+)
Increase (decrease) in Inventories
-(+)
Increase (decrease) in Other Current Assets
-(+)
Increase (decrease) in Accounts Payable
+(-)
Increase (decrease) in Accruals
+(-)
Increase (decrease) in Other Current Liabilities
+(-)
Total Cash Flow from Operating Activities
Cash Flow From Investing Activities
Increase (decrease) in Gross Fixed Assets
-(+)
Increase (decrease) in Investments
|-(+)
Total Cash Flow From Investing Activities
Cash Flow From Financing Activities
Increase (decrease) in Short Term Debt
+(-)
Increase (decrease) in Long Term Debt
+(-)
Increase (decrease) in Capital Stock
+(-)
Dividends Paid (Withdrawals)
(-)
Total Cash Flow From Financing Activities
Change In Cash
Add: Cash Beginning (January 1, 2020)
Equals Cash Ending (December 31, 2020)

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