The Cold Mountain Furnace Company is a retail store withlocations across the eastern United States. The companyâs projectedincome statement for its first year of operations, which endsDecember 31, 2018, and its projected balance sheet as of December31, 2018, are shown below:
Sales
$ 4,000,000
Cost of Goods Sold
2,300,000
Gross Margin
1,700,000
Selling and Administrative Expenses
800,000
Net Income
$ 900,000
Cash
$ 660,000
Accounts receivable
150,000
Inventory
400,000
Property, plant, and equip. (net of accum. deprec.)
200,000
Total assets
$1,410,000
Accounts payable
$ 110,000
Common stock
400,000
Retained earnings
900,000
Total liabilities and ownerâs equity
$1,410,000
The company is currently forecasting its 2019 operational year.Anticipated Projections for 2019 follow (continues ontonext page):
Budgeted Sales
First quarter
$1,050,000
Second quarter
$1,100,000
Third quarter
$1,150,000
Fourth quarter
$1,100,000
All sales are made on credit. Sales are collected in twoportions, consisting of 85% in the quarter of the sale and 15% inthe quarter following the sale. All of the accounts receivable asof December 31, 2018, will relate to sales in the fourth quarter of2018.
The cost of goods sold is expected to increase to 60% of salesin 2019. Inventory is purchased in the quarter of expected sale.80% of inventory purchases are paid for in the quarter of purchaseand 20% are paid for in the quarter following purchase. Safetystock is maintained at all times.
The accounts payable balance as of December 31, 2018, willrelate to inventory purchases made in the fourth quarter of2018.
Selling and administrative costs are expected to increase to$225,000 per quarter in 2019. Of thisquarterly amount, $10,000 is depreciation expenseof the property, plant, and equipment.
The inventory balance at the end of 2019 is expected to be$400,000.
Required:
Prepare the Cold Mountain Furnace Companyâs projected IncomeStatement and Balance Sheet for eachquarterly reporting period of 2019. In addition,prepare the companyâs projected Income Statement and Statement ofCash Flows for the full year of 2019. Assume that the company isnot subject to federal, state, or local income tax.
The Cold Mountain Furnace Company is a retail store withlocations across the eastern United States. The companyâs projectedincome statement for its first year of operations, which endsDecember 31, 2018, and its projected balance sheet as of December31, 2018, are shown below:
Sales | $ 4,000,000 |
Cost of Goods Sold | 2,300,000 |
Gross Margin | 1,700,000 |
Selling and Administrative Expenses | 800,000 |
Net Income | $ 900,000 |
Cash | $ 660,000 |
Accounts receivable | 150,000 |
Inventory | 400,000 |
Property, plant, and equip. (net of accum. deprec.) | 200,000 |
Total assets | $1,410,000 |
Accounts payable | $ 110,000 |
Common stock | 400,000 |
Retained earnings | 900,000 |
Total liabilities and ownerâs equity | $1,410,000 |
The company is currently forecasting its 2019 operational year.Anticipated Projections for 2019 follow (continues ontonext page):
Budgeted Sales | |
First quarter | $1,050,000 |
Second quarter | $1,100,000 |
Third quarter | $1,150,000 |
Fourth quarter | $1,100,000 |
All sales are made on credit. Sales are collected in twoportions, consisting of 85% in the quarter of the sale and 15% inthe quarter following the sale. All of the accounts receivable asof December 31, 2018, will relate to sales in the fourth quarter of2018.
The cost of goods sold is expected to increase to 60% of salesin 2019. Inventory is purchased in the quarter of expected sale.80% of inventory purchases are paid for in the quarter of purchaseand 20% are paid for in the quarter following purchase. Safetystock is maintained at all times.
The accounts payable balance as of December 31, 2018, willrelate to inventory purchases made in the fourth quarter of2018.
Selling and administrative costs are expected to increase to$225,000 per quarter in 2019. Of thisquarterly amount, $10,000 is depreciation expenseof the property, plant, and equipment.
The inventory balance at the end of 2019 is expected to be$400,000.
Required:
Prepare the Cold Mountain Furnace Companyâs projected IncomeStatement and Balance Sheet for eachquarterly reporting period of 2019. In addition,prepare the companyâs projected Income Statement and Statement ofCash Flows for the full year of 2019. Assume that the company isnot subject to federal, state, or local income tax.
