Question

1.  Lasso Corp. wants to forecast for 2020.  The end of year statements for 2019 are as follows:

Income Statement

Revenues                     $245,622

COGS                            - 142,461

Gross Profits                 103,161

Expenses                       - 49,124

EBIT                                 54,037

- Interest                        -  9,642

EBT                                  44,395

-Taxes                              -7,991

EAT                                  26,637

Balance Sheet

Current Assets           $179,304 　　　　　　Current liabilities          $85,700

Fixed Assets                 $140,930 　　　　　 Long-term debt            78,180

Total Assets                 $320,234 　　　　　 Total liabilities             $163,880

　　　　　　　　　　　　　　　　　　　　   Equity                          $156,354

　　　　　　　　　　　　　　　　　　　　Total Liabilities & Equity                      $320,234

Management expects the following for 2020:

An 8% increase in revenues; COGS will increase by 2% from its current percent of sales. Expenses will stay at the same percent of sales;  Current assets will also stay at their same percent of sales. Fixed assets will increase by $18,000 ; All interest will be paid at a 12% interest rate and will only be on long-term debt, which is not expected to change;  the tax rate is expected to stay at the same rate. No dividends are paid and any shortfalls should be made up in current liabilities.

Prepare a forecasted income statement and balance sheet for 2020.  Work to the nearest dollar.

Answer 1

A B с D E F 1 - w N 5 6 7 8 9 10 LASSO CORP. Forecasted Income Statement Year ended 2020 2019 Revenues $245,622 COGS 1424611 Gross Profit $103,161 Expenses 49124 EBIT $54,037 Interest 9642 EBT $44,395 Taxes 7991 EAT $36,404 2020 265272 159163 106108 53054 53055 9382 11 12 13 43673 7861 358121 14 15 16

H 1 J K L M N 2019 2020 Assets Current Assets Fixed Assets LASSO CORP. Forecasted Balance Sheet Year ended 2020 2020 Liabilities & Equity 2019 193648 Current Liabilities $85,700.00 158930 (Balancing Figure) Long Term Debt $78,180.00 Equity $156,354.00 352578 320234 179304 140930 118636 78180 155762 320234 352578

Notes : 1) All figures taken nearest to dollar.

2) Figures derived for the year 2020 are shown below in formulaes.

А B 1 WN 4 5 6 7 8 LASSO CORP. Forecasted Income Statement Year ended 2020 2019 2020 Revenues 245622 =C6*108/100 COGS 142461 =(07/06*100+2)*D6/100 Gross Profit =C6-C7 =D6-D7 Expenses 49124 =c9/C6*D6 EBIT =C8-C9 =D8-D9 Interest 9642 =12/100*78180 EBT =C10-C11 =D10-D11 Taxes 7991 =C13/c12*012 EAT =C12-C13 =D12-D13 9 10 Ե Ի Ե Ե E

3) EAT is Earnings after taxes . But the EAT for 2019 given in the question was $26637 which seems to be not the correct figure. It should be $36404. Because EAT = EBT - Taxes =44395 -7991 =$36404.

חד G H K 2019 Assets 2019 Current Assets 179304 Fixed Assets 140930 LASSO CORP. Forecasted Balance Sheet Year ended 2020 2020 Liabilities & Equity =179304/245622*265272 Current Liabilities =140930+18000 (Balancing Figure) Long Term Debt Equity -SUM(H6:19) 2020 =352578-78180-155762 85700 78180 78180 156354 =156354-36404+35812 =SUM(J6:19) -SUM(K6:69) =SUM(G6:59)

4) For any shortfall , it will be adjusted from current liabilities. So Current Liabilities is the balancing figure.

5) Equity contains the EAT and thus adjusted accordingly in 2020.