Problem 12-6 Additional Funds Needed The Booth Company\'s sales are forecasted t
ID: 2749051 • Letter: P
Question
Problem 12-6
Additional Funds Needed
The Booth Company's sales are forecasted to double from $1,000 in 2012 to $2,000 in 2013. Here is the December 31, 2012, balance sheet:
Booth's fixed assets were used to only 50% of capacity during 2012, but its current assets were at their proper levels in relation to sales. Spontaneous liabilities and all assets except fixed assets must increase at the same rate as sales, and fixed assets would also have to increase at the same rate if the current excess capacity did not exist. Booth's after-tax profit margin is forecasted to be 5% and its payout ratio to be 40%. What is Booth's additional funds needed (AFN) for the coming year? Round your answer to the nearest dollar.
$
Cash $ 100 Accounts payable $ 50 Accounts receivable 200 Notes payable 150 Inventories 200 Accruals 50 Net fixed assets 500 Long-term debt 400 Common stock 100 Retained earnings 250 Total assets $1000 Total liabilities and equity $1000Explanation / Answer
2012 2013 Sales $1,000 $2,000.00 Net income $40 $80 Dividends (45%) $18.00 $36.00 Addition to retained earnings $22 $44 2012 2013 2012 2013 Cash 100 200 Accounts payable 50 100 Accounts receivable 200 400 Notes payable 150 150 Inventories 200 400 Accruals 50 100 Net fixed assets 500 500 Long-term debt 400 400 Common stock 100 100 Retained earnings 250 $294 Total assets $1,000 1500 Total liabilities and equity $1,000 1144 Total assets $1,500 AFN 1500-1144= $356.00