Homework Help is Here – Start Your Trial Now!
Business
Finance
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 $194,000. 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 8%. New financing will be with a line of credit. Assume it will be added at the end of the year. Cash does not earn any interest income. Enter your answers as positive values. Do not round intermediate calculations. Round your answers to the nearest dollar. Garlington Technologies Inc. Pro Forma Income Statement December 31, 2020 Sales   $   Operating costs   $   EBIT   $   Interest   $   Pre-tax earnings   $   Taxes (25%)   $   Net income   $   Dividends:   $   Addition to RE:   $   Garlington Technologies Inc. Pro Forma Balance Statement December 31, 2020 Cash   $   Receivables   $   Inventories   $    Total current assets   $   Fixed assets   $    Total assets   $   Accounts payable   $   Line of credit   $   Accruals   $    Total current liabilities   $   LT bonds   $   Common stock   $   Retained earnings   $    Total L&E   $

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 $194,000. 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 8%. New financing will be with a line of credit. Assume it will be added at the end of the year. Cash does not earn any interest income. Enter your answers as positive values. Do not round intermediate calculations. Round your answers to the nearest dollar. Garlington Technologies Inc. Pro Forma Income Statement December 31, 2020 Sales   $   Operating costs   $   EBIT   $   Interest   $   Pre-tax earnings   $   Taxes (25%)   $   Net income   $   Dividends:   $   Addition to RE:   $   Garlington Technologies Inc. Pro Forma Balance Statement December 31, 2020 Cash   $   Receivables   $   Inventories   $    Total current assets   $   Fixed assets   $    Total assets   $   Accounts payable   $   Line of credit   $   Accruals   $    Total current liabilities   $   LT bonds   $   Common stock   $   Retained earnings   $    Total L&E   $

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
See similar textbooks
icon
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 $194,000. 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 8%. New financing will be with a line of credit. Assume it will be added at the end of the year. Cash does not earn any interest income. Enter your answers as positive values. Do not round intermediate calculations. Round your answers to the nearest dollar.

Garlington Technologies Inc.
Pro Forma Income Statement
December 31, 2020
Sales   $  
Operating costs   $  
EBIT   $  
Interest   $  
Pre-tax earnings   $  
Taxes (25%)   $  
Net income   $  
Dividends:   $  
Addition to RE:   $  


Garlington Technologies Inc.
Pro Forma Balance Statement
December 31, 2020
Cash   $  
Receivables   $  
Inventories   $  
 Total current assets   $  
Fixed assets   $  
 Total assets   $  
Accounts payable   $  
Line of credit   $  
Accruals   $  
 Total current liabilities   $  
LT bonds   $  
Common stock   $  
Retained earnings   $  
 Total L&E   $  
 
Expert Solution
Step 1

Garlington Technologies Inc.
Pro Forma Income Statement
December 31, 2020

                      Sales   $            4,200,000 

   Operating costs   $             3,200,000

                       EBIT   $            1,000,000

                 Interest   $            80,000

  Pre-tax earnings   $           920,000

          Taxes (25%)   $            230,000

          Net income   $           690,000

            Dividends:   $           194,000

    Addition to RE:   $           496,000


cash = opening balance +increase in sale + interest income of 8%
         = 160000 +200000 +80000

          = 4,40,000

trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Investments and Financial instruments
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS