P4-10

July August
Sales 380,000 390,000
Cash sales
Collections of A/R
Other income
 Total cash receipts
Disbursements
Purchases 120,000
Cash purchases
Payments of A/P
Rent
Wages & salaries
Taxes
Principal & interest
Fixed asset outlays
Dividends
 Total cash
disbursements

 Net cash flow

+ Add: Beginning cash
= Ending cash
- Less: Minimum cash
= Excess cash balance
(marketable securities)

P4-16

a) Income Statement – Bells Manufacturing Year

Ending December 31, 2015

Sales 1,800,000
Less: Cost of goods sold 1,100,000 0.611111111111111
Gross profits 700,000
Less: Operating expenses 450,000 0.25
Operating profits 250,000
 Less: Interest expense 24,500
Net profit before taxes
225,500
(NPBT)

Less: Taxes (0.40 ´ NPBT) 90,200

Net profit after taxes 135,300

Less: Cash dividends 85,000
To retained earnings 50,300

b)
Bell Manufacturing Breakdown of Costs and
Expenses into Fixed and Variable
Components For the Year Ended December
31, 2015

Cost of goods sold

Fixed cost 750,000 0.681818181818182
Variable cost 350,000 0.318181818181818
Total costs 1,100,000
Operating expenses
Fixed expenses 155,000 0.344444444444444
Variable expenses 295,000 0.655555555555556
Total expenses 450,000

Bells Manufacturing Pro form Income

Statement for the year ended December 31,
2016

Sales revenue 2,250,000

Less: Cost of goods sold

Fixed costs 937,500

Variable cost 437,500
Gross profits 875,000

Less: Operating expenses

Fixed expenses 193,750

Variable expenses 368,750
Operating profits 312,500
Less: Interest expense 24,500
Net profit before taxes 288,000

Less: Taxes (rate = 40%) 115,200

 Net profit after taxes 172,800
Less: Cash dividends 85,000
To retained earnings 87,800

P4-18

Assets
Current assets

Cash 50,000

Marketable securities 15,000

Accounts receivable
300,000
(10% of sales)

Inventories (12% of
360,000
sales)
Total current assets 725,000

Net fixed assets1 658,000

Total assets 1,383,000

Part b)

Fixed Assets 600000

Fixed Asset outlay 90000
Depreciation Exp -32000
Net Fixed Assets 658000
September October November
385,000 418,000 429,000
115,500 125,400 128,700
253,500 250,250 271,700
3,000 3,000 3,000
372,000 378,650 403,400

150,000 120,000 115,000

75000 60000 57500
60,000 75,000 60,000
3,500 3,500
46,800 46,200 50,160
8,250
4,700
8,500
4,600

186,400 189,400 187,910

185,600 189,250 215,490

150,000 335,600 524,850
335,600 524,850 740,340
8,000 8,000 8,000

327,600 516,850 732,340

Pro Forma Income Statement – Bells

Manufacturing Year Ending December 31,
2016 (Percent-0f-Sales Method)

Sales 2,250,000
Less: Cost of goods sold 1,375,000
Gross profits 875,000
Less: Operating expenses 562,500
Operating profits 312,500
 Less: Interest expense 24,500
Net profit before taxes (NPBT) 288,000
Less: Taxes (0.40 ´ NPBT) 115,200
Net profit after taxes 172,800
Less: Cash dividends 85,000
To retained earnings 87,800

Bell Manufacturing Breakdown of Costs

and Expenses into Fixed and Variable
Components For the Year Ended
December 31, 2016

Cost of goods sold 1,375,000

Fixed cost 937500
Variable cost 437500
Total costs 1375000
Operating expenses 562,500
Fixed expenses 193750
Variable expenses 368750
Total expenses 562500
Liabilities & stockholders’ equity
Current liabilities
 Accounts payable  
420,000
(14% of sales)
Accruals 60,000

Other current liabilities 30,000

Total current
510,000
liabilities
 Long-term debts 350,000

Total liabilities 860,000

 Common stock 200,000

 Retained earnings 270,000
Total stockholders’
470,000
equity
 External funds
53,000
required3
Total liabilities &
1,383,000
stockholders’ equity

External funds reuqired

Beg. Ret. Earnings 220000

Net profit After Taxes 120000
Cash Div. 70000
Ending Ret. Earning 270000
Total Assets - Total Liabilities and Stockholders'eqiuty