Bmal 530 excel project | bmal 530 |


žAssume ABC Company has asked you to not only prepare their 2015 year-end Balance Sheet but to also provide pro-forma financial statements for 2016. In addition, they have asked you to evaluate their company based on the pro-forma statements with regard to ratios. They also want you to evaluate 3 projects they are considering. Their information is as follows:

žEnd of the year information:

žAccount 12/31/15 Ending Balance

žCash 50,000

žAccounts Receivable 175,000

žInventory 126,00

žEquipment 480,000

žAccumulated Depreciation 90,000

žAccounts Payable 156,000

žShort-term Notes Payable 12,000

žLong-term Notes Payable 200,000

žCommon Stock 235,000

žRetained Earnings solve


žAdditional Information:

žSales for December total 10,000 units. Each month’s sales are expected to exceed the prior month’s results by 5%. The product’s selling price is $25 per unit.

žCompany policy calls for a given month’s ending inventory to equal 80% of the next month’s expected unit sales. The December 31 2015inventory is 8,400 units, which complies with the policy. The purchase price is $15 per unit.

žSales representatives’ commissions are 12.5% of sales and are paid in the month of the sales. The sales manager’s monthly salary will be $3,500 in January and $4,000 per month thereafter.

žMonthly general and administrative expenses include $8,000 administrative salaries, $5,000 depreciation, and 0.9% monthly interest on the long-term note payable.

žThe company expects 30% of sales to be for cash and the remaining 70% on credit. Receivables are collected in full in the month following the sale (none is collected in the month of sale).

žAll merchandise purchases are on credit, and no payables arise from any other transactions. One month’s purchases are fully paid in the next month.

The minimum ending cash balance for all months is $50,000. If necessary, the company borrows enough cash using a short-term note to reach the minimum. Short-term notes require an interest payment of 1% at each month-end (before any repayment). If the ending cash balance exceeds the minimum, the excess will be applied to repaying the short-term notes payable balance  

  žDividends of $100,000 are to be declared and paid in February. žNo cash payments for income taxes are to be made during the first calendar quarter. Income taxes will be assessed at 35% in the quarter. žEquipment purchases of $55,000 are scheduled for March. žABC Company’s management is also considering 3 new projects consisting of the purchase of new equipment. The company has limited resources, and may not be able to complete make all 3purchases. The information is as follows for the purchases below. 

ž Project 1 Project 2 Project 3 žPurchase Price $80,000 $175,000 $22,700 žRequired Rate of Return 6% 8% 12% žTime Period 3 years 5 years 2 years žCash Flows – Year 1 $48,000 $85,000 $15,000 žCash Flows – Year 2 $36,000 $74,000 $12,000 žCash Flows – Year 3 $22,000 $38,000 N/A žCash Flows – Year 4 N/A $26,800 N/A žCash Flows – Year 5 N/A $19,000 N/A  


žRequired Action:

žPart A:

žPrepare the year-end balance sheet for 2015. Be sure to use proper headings.

žPrepare budgets such that the pro-forma financial statements for the first quarter of 2016 may be prepared.

žSales budget, including budgeted sales for April.

žPurchases budget, the budgeted cost of goods sold for each month and quarter, and the cost of the March 31 budgeted inventory.

žSelling expense budget.

žGeneral and administrative expense budget.

žExpected cash receipts from customers and the expected March 31 balance of accounts receivable.

žExpected cash payments for purchases and the expected March 31 balance of accounts payable.

žCash budget.

žBudgeted income statement.

žBudgeted statement of retained earnings.

žBudgeted balance sheet.

  žPart B: žCalculate using Excel formulas, the NPV of each of the 3 projects. žIt is possible that ABC Company may not be able to complete all 3 projects. Therefore, advise ABC Company as to the order in which they should pursue the projects (i.e., which project should ABC Company attempt to do first, second, and last). žProvide justification and analysis as to why you chose the order you did. The analysis must also be done in Excel, not in a separate document. ž  žThis assignment must be submitted as 1 Excel document. 


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