Question

Jim's Espresso expects sales to grow by

10.3 %10.3%

next year. Using the following statements

LOADING...

and the percent of sales​ method, forecast:

a. Costs

b. Depreciation

c. Net Income

d. Cash

e. Accounts receivable

f. Inventory

g.​ Property, plant, and equipment

​(​Note:

Make sure to round all intermediate calculations to at least five decimal​ places.)

The Tax Cuts and Jobs Act of 2017 temporarily allows​ 100% bonus depreciation​ (effectively expensing capital​ expenditures). However, we will still include depreciation forecasting in this chapter and in these problems in anticipation of the return of standard depreciation practices during your career.

Income Statement			Balance Sheet
Sales	$ 206 comma 140$206,140		Assets
Costs Except Depreciation	( 99 comma 690 )(99,690)		Cash and Equivalents	$ 14 comma 990$14,990
EBITDA	$ 106 comma 450$106,450		Accounts Receivable	2 comma 1002,100
Depreciation	( 5 comma 980 )(5,980)		Inventories	3 comma 9703,970
EBIT	$ 100 comma 470$100,470		Total Current Assets	$ 21 comma 060$21,060
Interest Expense​ (net)	( 310 )(310)		​Property, Plant, and Equipment	9 comma 9109,910
​Pre-tax Income	$ 100 comma 160$100,160		Total Assets	$ 30 comma 970$30,970
Income Tax	( 35 comma 056 )(35,056)
Net Income	$ 65 comma 104$65,104		Liabilities and Equity
			Accounts Payable	$ 1 comma 480$1,480
			Debt	4 comma 0904,090
			Total Liabilities	$ 5 comma 570$5,570
			​Stockholders' Equity	25 comma 40025,400
			Total Liabilities and Equity	$ 30 comma 970

a. Costs

The forecasted costs will be _____

​(Round to the nearest dollar and enter all numbers as​ positive.)

b. Depreciation

The forecasted depreciation will be _____

​(Round to the nearest dollar and enter all numbers as​ positive.)

c. Net Income

The forecasted net income will be _____

​ (Round to the nearest​ dollar.)

d. Cash

The forecasted cash will be _____

​(Round to the nearest​ dollar.)

e. Accounts receivable

The forecasted accounts receivable will be _____

​(Round to the nearest​ dollar.)

f. Inventory

The forecasted inventory will be ______

​ (Round to the nearest​ dollar.)

g.​ Property, plant, and equipment

The forecasted​ property, plant, and equipment will be _____

​(Round to the nearest​ dollar.)

Answer 1

With the percent of sales methods, expenses and assets increase at the same rate as sales.

a]

Costs = $99,690 * (1 + 10.3%)

Costs = $109,958.07.

b]

Depreciation = $5,980 * (1 + 10.3%)

Depreciation = $6,595.94

c]

net income = $65,104 * (1 + 10.3%)

net income = $71,809.71.

d]

cash = $14,990 * (1 + 10.3%)

cash = $16,533.97