Problem 3-5 Universal Products Company has almost finished its pro forma financial statements for 2022, as shown next. Universal Products Company Financial Statements, 2021 and Pro Forma 2022 ($ thousands) INCOME STATEMENT Sales Cost of goods sold Operating expense Depreciation expense Interest expense Earnings before tax Tax Net income Current assets Net fixed assets Actual 2021 Total assets Current liabilities Long-term debt Owner's equity Total liabilities & equity $ 7,500 5,800 700 250 90 660 231 $429 Forecast 2022 Universal Products Company Financial Statements, 2021 and Pro Forma 2022 ($ thousands) BALANCE SHEET $ 7,900 6,100 700 260 Actual 2021 120 720 252 $ 468 3,800 3,000 $ 6,800 $1,150 700 4,950 $ 6,800 Forecast 2022 $ 4,050 $ 1,270 500 a. Assume that Universal plans to purchase $700,000 in fixed assets during 2022 and to dispose of no fixed assets during 2022. What would be its forecast for net fixed assets in 2022? b. Assume that Universal plans to have a dividend payout ratio of 50 percent in 2022 and will neither sell nor repurchase equity during 2022. What would be its forecast for owner's equity in 2022? c. Given the assumptions in questions (a) and (b), what is Universal's projected external funding required for 2022? Net fixed assets in 2022 Owner's equity in 2022 External funding required for 2022
Problem 3-5 Universal Products Company has almost finished its pro forma financial statements for 2022, as shown next. Universal Products Company Financial Statements, 2021 and Pro Forma 2022 ($ thousands) INCOME STATEMENT Sales Cost of goods sold Operating expense Depreciation expense Interest expense Earnings before tax Tax Net income Current assets Net fixed assets Actual 2021 Total assets Current liabilities Long-term debt Owner's equity Total liabilities & equity $ 7,500 5,800 700 250 90 660 231 $429 Forecast 2022 Universal Products Company Financial Statements, 2021 and Pro Forma 2022 ($ thousands) BALANCE SHEET $ 7,900 6,100 700 260 Actual 2021 120 720 252 $ 468 3,800 3,000 $ 6,800 $1,150 700 4,950 $ 6,800 Forecast 2022 $ 4,050 $ 1,270 500 a. Assume that Universal plans to purchase $700,000 in fixed assets during 2022 and to dispose of no fixed assets during 2022. What would be its forecast for net fixed assets in 2022? b. Assume that Universal plans to have a dividend payout ratio of 50 percent in 2022 and will neither sell nor repurchase equity during 2022. What would be its forecast for owner's equity in 2022? c. Given the assumptions in questions (a) and (b), what is Universal's projected external funding required for 2022? Net fixed assets in 2022 Owner's equity in 2022 External funding required for 2022
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Problem 3-5
Universal Products Company has almost finished its pro forma financial statements for 2022, as shown next.
Universal Products Company
Financial Statements, 2021 and Pro Forma 2022 ($ thousands)
INCOME STATEMENT
Sales
Cost of goods sold
Operating expense
Depreciation
expense
Interest expense
Earnings before tax
Tax
Net income
Actual
2021
Current assets
Net fixed assets
Total assets
Current liabilities
Long-term debt
Owner's equity
Total liabilities & equity
$ 7,500
5,800
700
250
90
660
231
$ 429
Forecast
2022
$ 7,900
6,100
700
260
120
720
252
$ 468
Universal Products Company
Financial Statements, 2021 and Pro Forma 2022 ($ thousands)
BALANCE SHEET
Actual
2021
$ 3,800
3,000
$ 6,800
$ 1,150
700
4,950
$ 6,800
Forecast
2022
$ 4,050
$ 1,270
500
a. Assume that Universal plans to purchase $700,000 in fixed assets during 2022 and to dispose of no fixed assets during 2022.
What would be its forecast for net fixed assets in 2022?
20
b. Assume that Universal plans to have a dividend payout ratio of 50 percent in 2022 and will neither sell nor repurchase equity
during 2022. What would be its forecast for owner's equity in 2022?
c. Given the assumptions in questions (a) and (b), what is Universal's projected external funding required for 2022?
Net fixed assets in 2022
Owner's equity in 2022
External funding required for 2022
Next
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 5 steps
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
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education