Martin Manufacturing Company Income Statement
Subject: Business   / Accounting
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Question: Martin Manufacturing Company Income Statement?Fo…
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Martin Manufacturing Company Income Statement?For the Year Ended December 31, 2014
Sales revenue?Less: $5,075,000
Cost of goods sold 3,704,000
Gross Profit?Less: 1,371,000
Operating expenses
Selling expense ?$650,000
General and administrative expenses 416,000
Depreciation expense 152,000
Total operating expense 1,218,000
Operating profit 153,000
Less: Interest expense 93,000
Net profit before taxes 60,000
Less: Income Taxes 24,000
Net profit 36,000
*Preferred stock dividends of $3,000 were paid.
**EPS for common stock is $0.33
Martin Manufacturing Company Balance Sheet December 31, 2014
Assets?
Current assets:?
Cash? $25,000
Accounts receivable $805,556
Inventory 700,625
Total current assets $1,531,181
Gross fixed assets (at cost) $2,093,819
Less: Accumulated depreciation 500,000
Net Fixed assets 1,593,819
Total assets 3,125,000
Liabilities and Stockholders’ Equity
Current liabilities:?
Accounts payable $ 230,000
Notes payable 311,000
Accruals 75,000
Total Current Liabilities $ 616,000
Long-term debt 1,165,250
Total liabilities 1,781,250
Stockholders’ Equity
Preferred stock (2,500 shares) 50,000
Common stock (100,000
Shares @ $4.00 par) 400,000
Paid in capital? 593,750
Retained earnings 300,000
Total Stockholders’ Eq 1,343,750
Total Liabilities and Stockholders’ Equity $3,125,000
***The firm’s 100,000 outstanding shares of common stock closed 2014 at a price of $11.38 Per share.
Data Table: Projected financial data for 2015:
Sales revenue? $6,500,000
Minimum cash balance 25,000
Inventory turnover (times) 7.0
Average collection period 50 days
Fixed-asset purchases? 400,000
Total dividend payments 20,000
Depreciation expense 185,000
Interest expense? 97,000
Accounts payable increase 20%
Accruals and long-term debt unchanged
Notes payable, preferred and
Common stock Unchanged
Income Statement
For the Year Ended December 31, 2014
Please help! This is Principals of Managerial Finance 14 th
Gitman, Lawrence J. & Zutter, Chad J. (2015) Principles of managerial finance (14th ed.) Prentice Hall.
ISBN: 9780133507690
Preparing Martin Manufacturing’s 2015 Pro Forma Financial Statements. To improve its competitive position, Martin Manufacturing is planning to implement a major equipment modernization program. Included will be replacement and modernization of key manufacturing equipment at a cost of $400,000 in 2015. The planned program is expected to lower the variable cost per unit of finished product. Terri Spiro, an experienced budget analyst, has been charged with preparing a forecast of the firm’s 2015 financial position, assuming replacement and modernization of manufacturing equipment. She plans to use the 2014 financial statements, along with the key projected financial data summarized in the attached table.
Respond to the following:
Use the historical and projected financial data provided to prepare a pro forma income statement for the year ended December 31, 2015. (Hint: Use the percent of sales method to estimate all values except depreciation and interest expense, which have been estimated by management and included in the table.)
Use the projected financial data along with relevant data from the pro forma income statement prepared in part (1) to prepare the pro forma balance sheet at December 31, 2015. (Hint: Use the judgmental approach.)
Will Martin Manufacturing Company need to obtain external financing to fund the proposed equipment modernization program? Explain.
