ABC Company – Excel Project Instructions
Excel Project Instructions
Assume ABC Company has asked you to not only prepare their 2013 year-end Balance Sheet, but to also provide pro-forma financial statements for 2014. In addition, they have asked you to evaluate their company based on the pro-forma statements and with regard to ratios. They also want you to evaluate 3 projects they are considering. Their information is as follows:
End of the year information:
Account |
12/31/13 Ending Balance |
Cash |
160,000 |
Accounts Receivable |
42,500 |
Inventory |
63,400 |
Equipment |
745,000 |
Accumulated Depreciation |
292,460 |
Accounts Payable |
36,900 |
Short-term Notes Payable |
18,300 |
Long-term Notes Payable |
157,225 |
Common Stock |
450,000 |
Retained Earnings |
solve |
Additional Information:
· Sales for December total 12,000 units. Each month’s sales are expected to exceed the prior month’s results by 5%. The product’s selling price is $15 per unit.
· Company policy calls for a given month’s ending inventory to equal 80% of the next month’s expected unit sales. The December 31 inventory is 9,400 units, which complies with the policy. The purchase price is $8 per unit.
· Sales representatives’ commissions are 10.0% 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.
· Monthly general and administrative expenses include $8,000 administrative salaries, $5,000 depreciation, and 0.9% monthly interest on the long-term note payable.
· The 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).
· All 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 $140,000. 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.
· Dividends of $100,000 are to be declared and paid in February.
· No cash payments for income taxes are to be made during the first calendar quarter. Income taxes will be assessed at 35% in the quarter.
· Equipment purchases of $55,000 are scheduled for March.
ABC 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 3 purchases. The information is as follows for the purchases below.
|
Project 1 |
Project 2 |
Project 3 |
Purchase Price |
$50,000 |
$75,000 |
$32,500 |
Required Rate of Return |
12% |
8% |
10% |
Time Period |
3 years |
5 years |
2 years |
Cash Flows – Year 1 |
$18,000 |
$25,000 |
$20,000 |
Cash Flows – Year 2 |
$22,000 |
$20,000 |
$18,000 |
Cash Flows – Year 3 |
$22,000 |
$18,000 |
N/A |
Cash Flows – Year 4 |
N/A |
$16,500 |
N/A |
Cash Flows – Year 5 |
N/A |
$15,000 |
N/A |
Required Action:
Part A:
- Prepare the year-end Balance Sheet for 2013. Be sure to use proper headings.
- Prepare budgets such that the pro-forma financial statements may be prepared.
- Sales budget, including budgeted sales for April.
- Purchases budget, the budgeted cost of goods sold for each month and quarter, and the cost of the March 31 budgeted inventory.
- Selling expense budget.
- General and administrative expense budget.
- Expected cash receipts from customers and the expected March 31 balance of accounts receivable.
- Expected cash payments for purchases and the expected March 31 balance of accounts payable.
- Cash budget.
- Budgeted income statement.
- Budgeted statement of retained earnings.
- Budgeted balance sheet.
Part B:
- Calculate using Excel formulas, the NPV of each of the 3 projects.
- It is possible that ABC Company may not be able to complete all 3 projects. Therefore, please 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).
- Provide justification and analysis as to why you chose the order you did. The analysis should also be done in Excel, not in a separate document.
This assignment must be submitted as 1 Excel document.
This assignment is due by 11:59 p.m. (ET) on Friday of Module/Week 8.
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