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forecasted balance sheet income statement and statement of cash flows balance sheet 691936

Forecasted Balance Sheet, Income Statement, and Statement of Cash Flows

Balance Sheet

2008

Cash                                                                             

$ 40

Other current assets                                                                 

350

Property, plant, and equipment, net                                                       

1,000

Total assets                                                                        

 $1,390

Accounts payable                                                                    

$ 100

Bank loans payable                                                                  

1,000

Paid in capital                                                                      

100

Retained earnings                                                                    

190

Total liabilities and stockholders’ equity                                              

 $1,390

 

Income Statement

2008

Sales                 

$1,000

Cost of goods sold      

350

Gross profit            

$650

Depreciation expense    

200

Other operating expenses 

250

Operating profit        

$200

Interest expense        

120

Income before income taxes

$80

Income taxes           

20

Net income            

$60

In addition, Lorien has assembled the following forecasted information for 2009.

(a) Sales are expected to increase to $1,200.

(b) Lorien does not expect to buy any new property, plant, and equipment during 2009.

(c) Because of adverse banking conditions, Lorien does not expect to receive any new bank loans in 2009.

(d) Lorien plans to pay cash dividends of $15 in 2009.

Instructions:

1. Prepare a forecasted balance sheet, a forecasted income statement, and a forecasted statement of cash flows for 2009. Clearly state what assumptions you make. Use the indirect method for reporting cash from operating activities.

2. If you have constructed your forecasted cash flow statement correctly, you will see that Lorien plans to distribute cash to shareholders through two different means in 2009. Which of these methods involves distributing an equal amount of cash for each share owned? Which of these methods channels the cash to shareholders who are the least optimistic about the prospects of the company?

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