FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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a1. Produce an income statement for 2020. Assume that net working capital will equal 50% of fixed assets.

a2. Produce a balance sheet for 2020. Assume that net working capital will equal 50% of fixed assets.

b. Now assume that the balancing item is debt and that no equity is to be issued. Prepare a completed pro forma balance sheet for 2020.

c. Assume that the balancing item is debt and that no equity is to be issued, what is the projected debt ratio for 2020?

The following tables contain financial statements for Dynastatics Corporation.
Although the company has not been growing, it now plans to expand and will
increase net fixed assets (i.e., assets net of depreciation) by $200,000 per year for
the next 4 years, and it forecasts that the ratio of revenues to total assets will
remain at 1.50. Annual depreciation is 20% of net fixed assets at the beginning of
the year. Fixed costs are expected to remain at $94 and variable costs at 70% of
revenue. The company's policy is to pay out one-half of net income as dividends
and to maintain a book debtratio of 20% of total capital.
INCOME STATEMENT 2019 (figures in thousands)
Revenue
1,800
Fixed costs
94
Variable Cost (70%) of revenue)
1,260
Depreciation
$
160
Interest (6% of beginning of year debt)
Taxable Income
18
268
Taxes (at 35%)
$
$
94
Net Income
174
Dividends
$87
Addition to retained earnings
$87
INCOME STATEMENT 2019 (figures in thousands)
Assests
Net Working Capital
Fixed Assets
400
2$
800
Total Assets
1.200
Liabilities and Shareholders equity
Debt
300
Equity
Total liabilities and shareholders equity
2$
900
1,200
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Transcribed Image Text:The following tables contain financial statements for Dynastatics Corporation. Although the company has not been growing, it now plans to expand and will increase net fixed assets (i.e., assets net of depreciation) by $200,000 per year for the next 4 years, and it forecasts that the ratio of revenues to total assets will remain at 1.50. Annual depreciation is 20% of net fixed assets at the beginning of the year. Fixed costs are expected to remain at $94 and variable costs at 70% of revenue. The company's policy is to pay out one-half of net income as dividends and to maintain a book debtratio of 20% of total capital. INCOME STATEMENT 2019 (figures in thousands) Revenue 1,800 Fixed costs 94 Variable Cost (70%) of revenue) 1,260 Depreciation $ 160 Interest (6% of beginning of year debt) Taxable Income 18 268 Taxes (at 35%) $ $ 94 Net Income 174 Dividends $87 Addition to retained earnings $87 INCOME STATEMENT 2019 (figures in thousands) Assests Net Working Capital Fixed Assets 400 2$ 800 Total Assets 1.200 Liabilities and Shareholders equity Debt 300 Equity Total liabilities and shareholders equity 2$ 900 1,200
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