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.
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