EXCESS CAPACITY
Krogh Lumber's 2016 financial statements are shown here.
Krogh Lumber: Balance Sheet as of December 31, 2016 (Thousands of Dollars) | ||||
Cash | $1,800 | Accounts payable | $7,200 | |
Receivables | 10,800 | Notes payable | 3,472 | |
Inventories | 12,600 | Accrued liabilities | 2,520 | |
Total current assets | $25,200 | Total current liabilities | $13,192 | |
Mortgage bonds | 5,000 | |||
Net fixed assets | 21,600 | Common stock | 2,000 | |
Retained earnings | 26,608 | |||
Total assets | $46,800 | Total liabilities and equity | $46,800 |
Krogh Lumber: Income Statement for December 31, 2016 (Thousands of Dollars) | |||
Sales | $36,000 | ||
Operating costs including depreciation | 30,783 | ||
Earnings before interest and taxes | $5,217 | ||
Interest | 1,017 | ||
Earnings before taxes | $4,200 | ||
Taxes (40%) | 1,680 | ||
Net income | $2,520 | ||
Dividends (60%) | $1,512 | ||
Addition to retained earnings | $1,008 |
Krogh Lumber Pro Forma Income Statement December 31, 2017 (Thousands of Dollars) | |||
2016 | 2017 | ||
Sales | $36,000 | $ | |
Operating costs (includes depreciation) | 30,783 | ||
EBIT | $5,217 | $ | |
Interest expense | 1,017 | ||
EBT | $4,200 | $ | |
Taxes (40%) | 1,680 | ||
Net Income | $2,520 | $ | |
Dividends | $1,512 | $ | |
Addition to RE | $1,008 | $ |
Krogh Lumber Pro Forma Balance Statement December 31, 2017 (Thousands of Dollars) | |||
2016 | 2017 | ||
Assets | |||
Cash | $1,800 | $ | |
Accounts receivable | 10,800 | ||
Inventories | 12,600 | ||
Fixed assets | 21,600 | ||
Total assets | $46,800 | $ | |
Liabilities and Equity | |||
Payables + accruals | $9,720 | $ | |
Short-term bank loans | 3,472 | ||
Total current liabilities | $13,192 | $ | |
Long-term bonds | 5,000 | ||
Total liabilities | $18,192 | $ | |
Common stock | 2,000 | ||
Retained earnings | 26,608 | ||
Total common equity | $28,608 | $ | |
Total liab. and equity | $46,800 | $ |
1..Full capacity sales=36000/61%= |
59016.39 |
So, |
Percentage by which 2017 sales could increase over 2016 sales without the need for an increase in fixed assets= |
(59016.39-36000)/36000= |
63.93% |
c.. Krogh Lumber Pro Forma Income Statement December 31, 2017 (Thousands of Dollars) | |||
2016 | 2017 | ||
Sales | $36,000 | 36000*1.3= | 46800 |
Operating costs (includes depreciation) | 30,783 | 46800*80%= | 37440 |
EBIT | $5,217 | 9360 | |
Interest expense | 1,017 | (3568.32+6626.88)*10.5% | 1070.50 |
EBT | $4,200 | 8289.50 | |
Taxes (40%) | 1,680 | 8289.5*40%= | 3315.80 |
Net Income | $2,520 | 4973.70 | |
Dividends | $1,512 | 4973.70*60%= | 2984.22 |
Addition to RE | $1,008 | 1989.48 | |
Krogh Lumber Pro Forma Balance Statement December 31, 2017 (Thousands of Dollars) | |||
2016 | 2017 | ||
Assets | |||
Cash | $1,800 | 1800*1.3= | 2340 |
Accounts receivable | 10,800 | 10800*1.3= | 14040 |
Inventories | 12,600 | 12600*1.3= | 16380 |
Fixed assets | 21,600 | 21600 | |
Total assets | $46,800 | 54360 | |
Liabilities and Equity | |||
Payables + accruals | $9,720 | 9720*1.3= | 12636 |
Short-term bank loans | 3,472 | (22831.2-12636)*35%= | 3568.32 |
Total current liabilities | $13,192 | 16204.32 | |
Long-term bonds | 5,000 | (22831.2-12636)*65%= | 6626.88 |
Total liabilities | $18,192 | 54360*42%= | 22831.20 |
Common stock | 2,000 | Tot. common eq.-Ret. Earn. | 2931.32 |
Retained earnings | 26,608 | 26608+1989.48= | 28597.48 |
Total common equity | $28,608 | Total Liab.& equity-Tot.liab.--(54360-22831.20) | 31528.80 |
Total liab. and equity | $46,800 | 54360 |
ANSWER: | |
Balances of : | |
(Rounded to the nearest hundredth of thousand of dollars) | |
Notes payable | 3600 |
Bonds | 6600 |
Common stock | 2900 |
Retained earnings | 28600 |
EXCESS CAPACITY Krogh Lumber's 2016 financial statements are shown here. Krogh Lumber: Balance Sheet as of...
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