Use the following information to answer questions 1-14:

It is now January 2018. The year 2017 finished well. The finalized year-end financial
statements for 2017 are provided in the excel file associated with this assignment.
Randolf and Tenisa at Comfy Home would like the accountant to prepare pro-forma
financial statements for 2018 based on an optimistic sales forecast. Tenisa has won the
business of a large corporate client and the couple believe that Comfy Home revenues
will increase by 30% in 2018 as compared with the year 2017.
Using the actual financial statements for 2017 (in the excel file with this assignment),
please prepare a pro-forma balance sheet and income statement for 2018 using the
percent of sales method. For any financial statement line items where no additional
information is provided to indicate otherwise, assume the line item changes
proportionally to sales. Note: Please use excel formulas for all calculations and do not
round any intermediate steps. If you round during intermediate steps, you may get
rounding errors resulting in incorrect answers.
Randolf and Tenisa provide the following additional information to the accountant to
prepare the pro-forma statements:

 No new investments in furniture and fixtures or buildings and property

are expected for 2018.
 Of the $540,000 in building and properties at year-end 2017, $365,000
represents buildings and $175,000 represents property (land). The
buildings are being depreciated straight-line over 10 years with no salvage
value.
 The furniture and fixtures are being depreciated straight-line over 15
years with no salvage value.
 The $45,000 current portion of the bank loan will be paid on December
31, 2018. Of the $255,000 in long term debt, another $45,000 comes due
on December 31, 2019.
 Comfy Home does not plan to obtain any additional loans in 2018.
 The interest rate for Comfy Home’s borrowing has declined recently to
6%. It is expected to be the average rate of interest for Comfy Home
short and long-term borrowings in 2018. Use total beginning borrowings
to estimate the interest expense for 2018.
 Comfy Home's expected tax rate is 25%. Comfy Home has no outstanding
deferred tax assets or deferred tax liabilities.
 Comfy Home is planning a $50,000 cash disbursement to its owners on
12/31/2018. No contributions to owners’ equity are foreseen.
 Comfy Home’s insurance premium covers its buildings and property as
well as liability and is not expected to increase in 2018.
 Use Cash as the plug in the pro-forma financial statements.

 
 
Flag question: Question 1
Question 10.5 pts
What is the forecasted total revenue on Comfy Home’s 2018 pro-forma financial
statements?
$2,082,600

Flag question: Question 2

Question 20.5 pts
What is the forecasted marketing expenses on Comfy Home’s 2018 pro-forma financial
statements?
$59,800

Flag question: Question 3

Question 30.5 pts
What is the forecasted depreciation expense on Comfy Home’s 2018 pro-forma
financial statements?
$46,500

Flag question: Question 4

Question 40.5 pts
What is the forecasted interest expense on Comfy Home’s 2018 pro-forma financial
statements?
 $18,000

Flag question: Question 5

Question 50.5 pts
What is the forecasted cost of goods sold on Comfy Home’s 2018 pro-forma financial
statements?
 $1,280,500

Flag question: Question 6

Question 60.5 pts
What is the forecasted insurance expense on Comfy Home’s 2018 pro-forma financial
statements?
 $48000

Flag question: Question 7

Question 70.5 pts
What is the forecasted furniture and fixtures on Comfy Home’s 2018 pro-forma
financial statements?
 $150,000
Flag question: Question 8
Question 80.5 pts
What is the forecasted inventories on Comfy Home’s 2018 pro-forma financial
statements?
 $465,400

Flag question: Question 9

Question 90.5 pts
What is the forecasted current portion of bank loan on Comfy Home’s 2018 pro-forma
financial statements?
 $45000

Flag question: Question 10

Question 100.5 pts
What is the forecasted bank loan (long term portion only) on Comfy Home’s 2018 pro-
forma financial statements?
 $210,000

Flag question: Question 11

Question 110.5 pts
What is the forecasted contributed capital on Comfy Home’s 2018 pro-forma financial
statements?
 $260,000

Flag question: Question 12

Question 120.5 pts
What is the forecasted accounts receivable on Comfy Home’s 2018 pro-forma financial
statements?
 $231,400

Flag question: Question 13

Question 130.5 pts
What is the forecasted deferred revenue on Comfy Home’s 2018 pro-forma financial
statements?
 $23,400

Flag question: Question 14

Question 140.5 pts
What is the forecasted cash on Comfy Home’s 2018 pro-forma financial statements?
 $179,775

Flag question: Question 15

Question 151 pts
The following information is relevant for questions 15 and 16. You may also find the
information presented in the excel spreadsheet tab for these questions helpful.
On January 1, 2021, Comfy Home enters into a 3-year operating lease for the building
that houses one of its shops and offices.   The lease gives Comfy Home the right to
occupy the building for the calendar years 2021, 2022, and 2023. A lease payment in
the amount of $40,000 is due on December 31, 2021. The next payment of $42,000 is
due on December 31, 2022, and the final payment of $45,000 a year later. Comfy
Home’s cost of capital is 10%.
What will be the value of the operating lease liability on Comfy Home's 12/31/2021
balance sheet, after the initial payment of $40,000?
Round your answer to the nearest whole dollar.
$75,372
 
Flag question: Question 16
Question 161 pts
The following information is relevant for questions 15 and 16. You may also find the
information presented in the excel spreadsheet tab for these questions helpful. 
On January 1, 2021, Comfy Home enters into a 3-year operating lease for the building
that houses one of its shops and offices.   The lease gives Comfy Home the right to
occupy the building for the calendar years 2021, 2022, and 2023. A lease payment in
the amount of $40,000 is due on December 31, 2021. The next payment of $42,000 is
due on December 31, 2022, and the final payment of $45,000 a year later. Comfy
Home’s cost of capital is 10%.
What is the value of the ROU asset on Comfy Home's 12/31/2022 balance sheet, after
the first- and second-year payments have been made?
Round your answer to the nearest whole dollar.
$34,961 

Flag question: Question 17

Question 171 pts
Use the following information to answer to Questions 17 and 18. You might also find the
information presented in the excel spreadsheet tab for Q17/18 helpful.
Comfy Home is considering one of two mutually exclusive investments. Comfy Home's
cost of capital is 10%. Please ignore the effects of taxes.
Project A: Comfy Home will purchase a specialized candle mold machine that will allow
it to create candles in custom shapes and sizes.  Comfy Home will pay $40,000 for the
machine and place it in service on 12/31/2021.  The machine will be depreciated
straight-line over its 10-year useful life.  Comfy Home expects the machine to generate
net cash flows of $14,000 every year for 5 years. 
Project B: Comfy Home will purchase a patent for several perfumes it will use in its
candles.   It will pay $40,000 for the rights on 12/31/2021.  The patent will be amortized
straight-line over its useful life of 9 years.  Comfy Home expects the patent to generate
net cash flows of $10,000 for 9 years.
What would be the NPV of Project B?
Round your answer to the nearest whole dollar.
$17,590
 
Flag question: Question 18
Question 181 pts
Use the following information to answer to Questions 17 and 18. You might also find the
information presented in the excel spreadsheet tab for Q17/18 helpful.
Comfy Home is considering one of two mutually exclusive investments. Comfy Home's
cost of capital is 10%. Please ignore the effects of taxes.
Project A: Comfy Home will purchase a specialized candle mold machine that will allow
it to create candles in custom shapes and sizes.  Comfy Home will pay $40,000 for the
machine and place it in service on 12/31/2021.  The machine will be depreciated
straight-line over its 10-year useful life.  Comfy Home expects the machine to generate
net cash flows of $14,000 every year for 5 years. 
Project B: Comfy Home will purchase a patent for several perfumes it will use in its
candles.   It will pay $40,000 for the rights on 12/31/2021.  The patent will be amortized
straight-line over its useful life of 9 years.  Comfy Home expects the patent to generate
net cash flows of $10,000 for 9 years.
Which of the following statements is most true about these two projects?
Group of answer choices
Comfy Home should invest in Project A
 
Flag question: Question 19
Question 191 pts
Using the financial statements provided (see tab in the excel file for Q19), please
calculate Comfy Home’s Free Cash Flow in 2018.
Please note that the company’s tax rate is 25% and anticipated capital expenditures for
2018 are $25,000.
Round your answer to the nearest whole dollar. 
$95,000