Excel Project Instructions
Assume
ABC Company has asked you to not only prepare their 2013 year-end Balance Sheet
but to also provide pro-forma financial statements for 2014. In addition, they
have asked you to evaluate their company based on the pro-forma statements with
regard to ratios. They also want you to evaluate 3 projects they are
considering. Their information is as follows:
End
of the year information:
Account
12/31/13
Ending Balance
Cash
160,000
Accounts Receivable
126,000
Inventory
75,200
Equipment
745,000
Accumulated Depreciation
292,460
Accounts Payable
36,900
Short-term Notes Payable
18,300
Long-term Notes Payable
157,225
Common Stock
450,000
Retained Earnings
solve
Additional
Information:
·
Sales
for December total 12,000 units. Each monthâs sales are expected to exceed the
prior monthâs results by 5%. The productâs selling price is $15 per unit.
·
Company
policy calls for a given monthâs ending inventory to equal 80% of the next
monthâs expected unit sales. The December 31 2012 inventory is 9,400 units,
which complies with the policy. The purchase price is $8 per unit.
·
Sales
representativesâ commissions are 10.0% of sales and are paid in the month of
the sales. The sales managerâs monthly salary will be $3,500 in January and
$4,000 per month thereafter.
·
Monthly
general and administrative expenses include $8,000 administrative salaries,
$5,000 depreciation, and 0.9% monthly interest on the long-term note payable.
·
The
company expects 30% of sales to be for cash and the remaining 70% on credit.
Receivables are collected in full in the month following the sale (none is
collected in the month of sale).
·
All
merchandise purchases are on credit, and no payables arise from any other
transactions. One monthâs purchases are fully paid in the next month.
·
The
minimum ending cash balance for all months is $140,000. If necessary, the
company borrows enough cash using a short-term note to reach the minimum. Short-term
notes require an interest payment of 1% at each month-end (before any
repayment). If the ending cash balance exceeds the minimum, the excess will be
applied to repaying the short-term notes payable balance.
·
Dividends
of $100,000 are to be declared and paid in February.
·
No
cash payments for income taxes are to be made during the first calendar
quarter. Income taxes will be assessed at 35% in the quarter.
·
Equipment
purchases of $55,000 are scheduled for March.
ABC Companyâs
management is also considering 3 new projects consisting of the purchase of new
equipment. The company has limited resources, and may not be able to complete
make all 3 purchases. The information is as follows for the purchases below.
Project 1
Project 2
Project 3
Purchase Price
$50,000
$75,000
$32,500
Required Rate of Return
12%
8%
10%
Time Period
3 years
5 years
2 years
Cash Flows â Year 1
$18,000
$25,000
$20,000
Cash Flows â Year 2
$22,000
$20,000
$18,000
Cash Flows â Year 3
$22,000
$18,000
N/A
Cash Flows â Year 4
N/A
$16,500
N/A
Cash Flows â Year 5
N/A
$15,000
N/A
Required Action:
Part A:
·
Prepare
the year-end balance sheet for 2013. Be sure to use proper headings.
·
Prepare
budgets such that the pro-forma financial statements may be prepared.
·
Sales
budget, including budgeted sales for April.
·
Purchases
budget, the budgeted cost of goods sold for each month and quarter, and the
cost of the March 31 budgeted inventory.
·
Selling
expense budget.
·
General
and administrative expense budget.
·
Expected
cash receipts from customers and the expected March 31 balance of accounts
receivable.
·
Expected
cash payments for purchases and the expected March 31 balance of accounts
payable.
·
Cash
budget.
·
Budgeted
income statement.
·
Budgeted
statement of retained earnings.
·
Budgeted
balance sheet.
Part B:
·
Calculate
using Excel formulas, the NPV of each of the 3 projects.
·
It
is possible that ABC Company may not be able to complete all 3 projects.
Therefore, advise ABC Company as to the order in which they should pursue the
projects (i.e., which project should ABC Company attempt to do first, second,
and last).
·
Provide
justification and analysis as to why you chose the order you did. The analysis
must also be done in Excel, not in a separate document.
This
assignment must be submitted as 1 Excel document.
This assignment
is due by 11:59 p.m. (ET) on Friday
of Module/Week 8.
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