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The Nautical Co. Ltd. expects sales of $2.4 mill this year andthe same amount the followin

The Nautical Co. Ltd. expects sales of $2.4 mill this year andthe same amount the followin

The Nautical Co. Ltd. expects sales of $2.4 mill this year andthe same amount the following year. All sales are on credit and arespread evenly throughout the year. On the basis of the followinginformation, prepare a forecast income statement and balance sheetfor year ended December 31st, 2017.

• Cash : Minimum of 4 percent of annual sales

• Accounts Receivable : 60 day average collection based onannual sales.

• Inventories : Turnover of eight times a year.

• Net Fixed Assets : $500,000 now. Capital expenditure equal todepreciation.

• Accounts Payable : One month’s purchases.

• Accrued expenses : 3 percent of sales.

• Bank borrowing : $50,000 now. Can borrow as much as$250,000.

• Long Term Debt : $300,000 now; payable balance $75,000 at yearend.

• Common Stock : $100,000. No addition planned.

• Retained Earnings : $500,000 now ( the opening balance ).

• Net profit margin : 8% of sales

• Dividends : None

• Cost of Goods Sold : 60% of sales.

• Purchases : 50% of cost of goods sold.

• Income Taxes : 50% of before tax profits.

Abhinav 02-Dec-2019

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