Business Applications Case Use of real-world numbers for forecasting
The following information was drawn from the annual report of Machine import Company (MIC):
For the Years 2011 2012 | |
$600,000 | $690,000 |
480,000 | 552,000 |
120,000 | 138,000 |
| 62,000 |
$120,000 | $200,000 |
Balance Sheets | ||
Assets | $880,000/ | $880,000 |
Liabilities | $200,000 | $ 0 |
Stockholders’ equity | ||
Common stock | 380,000 | 380,000 |
Retained earnings | 300,000 | 500,000 |
Total liabilities and stockholders’ equity | $880,000 | $880,000 |
*By definition, extraordinary items are not likely to recur in the future. j
Required
a. Compute the percentage of growth in net income from 2011 to 2012. Can stockholders expect j a similar increase between 2012 and 2013?
b. Assuming that MIC collected $200,000 cash from earnings (i.e., net income), explain how this money was spent in 2012.
c. Assuming that MIC experiences the same percentage of growth from 2012 to 2013 as it did from 2011 to 2012, determine the amount of income from continuing operations that the owners can expect to see on the 2013 income statement.
d. During 2013, MIC experienced a $40,000 loss due to storm damage (note that this would be shown as an extraordinary loss on the income statement). Liabilities and common stock were unchanged from 2012 to 2013. Use the information that you computed in Requirement c plus , the additional information provided in the previous two sentences to prepare an income statement and balance sheet as of December 31, 2013.
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