Financing Deficit Garlington Technologies Inc.'s 2019 financial statements are shown below: Income Statement for December 31, 2019 Sales $4,000,000 Operating costs 3,200,000 EBIT $ 800,000 Interest 120,000 Pre-tax earnings $ 680,000 Taxes (25%) 170,000 Net income 510,000 Dividends $ 190,000 Balance Sheet as of December 31, 2019 Cash $ 160,000 Accounts payable $ 360,000 Receivables 360,000 Line of credit 0 Inventories 720,000 Accruals 200,000 Total CA $1,240,000 Total CL $ 560,000 Fixed assets 4,000,000 Long-term bonds 1,000,000 Total Assets $5,240,000 Common stock 1,100,000 RE 2,580,000 Total L&E $5,240,000 Suppose that in 2020 sales increase to $4.2 million and that 2020 dividends will increase to $244,000. Forecast the financial statements using the forecasted financial statement method. Assume the firm operated at full capacity in 2019. The long-term bonds have an interest rate of 9%.
Financing Deficit Garlington Technologies Inc.'s 2019 financial statements are shown below: Income Statement for December 31, 2019 Sales $4,000,000 Operating costs 3,200,000 EBIT $ 800,000 Interest 120,000 Pre-tax earnings $ 680,000 Taxes (25%) 170,000 Net income 510,000 Dividends $ 190,000 Balance Sheet as of December 31, 2019 Cash $ 160,000 Accounts payable $ 360,000 Receivables 360,000 Line of credit 0 Inventories 720,000 Accruals 200,000 Total CA $1,240,000 Total CL $ 560,000 Fixed assets 4,000,000 Long-term bonds 1,000,000 Total Assets $5,240,000 Common stock 1,100,000 RE 2,580,000 Total L&E $5,240,000 Suppose that in 2020 sales increase to $4.2 million and that 2020 dividends will increase to $244,000. Forecast the financial statements using the forecasted financial statement method. Assume the firm operated at full capacity in 2019. The long-term bonds have an interest rate of 9%.
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter9: Corporate Valuation And Financial Planning
Section: Chapter Questions
Problem 9P
Related questions
Question
Financing Deficit
Garlington Technologies Inc.'s 2019 financial statements are shown below:
Income Statement for December 31, 2019
| Sales | $4,000,000 |
| Operating costs | 3,200,000 |
| EBIT | $ 800,000 |
| Interest | 120,000 |
| Pre-tax earnings | $ 680,000 |
| Taxes (25%) | 170,000 |
| Net income | 510,000 |
| Dividends | $ 190,000 |
Balance Sheet as of December 31, 2019
| Cash | $ 160,000 | Accounts payable | $ 360,000 | |
| Receivables | 360,000 | Line of credit | 0 | |
| Inventories | 720,000 | Accruals | 200,000 | |
| Total CA | $1,240,000 | Total CL | $ 560,000 | |
| Fixed assets | 4,000,000 | Long-term bonds | 1,000,000 | |
| Total Assets | $5,240,000 | Common stock | 1,100,000 | |
| RE | 2,580,000 | |||
| Total L&E | $5,240,000 |
Suppose that in 2020 sales increase to $4.2 million and that 2020 dividends will increase to $244,000.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
Fundamentals Of Financial Management, Concise Edi…
Finance
ISBN:
9781337902571
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
Fundamentals Of Financial Management, Concise Edi…
Finance
ISBN:
9781337902571
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning