Cooley Textile’s 2000 financial statements

Q16. Cooley Textile’s 2000 financial statements are shown below.

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Balance Sheet
Assets$ (000)Liabilities & Equity$ (000)
Cash (3%)1,080Accounts payable (20%)4,320
Accounts receivable (18%)6,480Accruals (7%)2,880
Inventory (25%)9,000Notes payable2,100
Total current assets16,560Total current liabilities9,300
Fixed assets (35%)12,600Mortgage Bonds3,500
Total debt12,800
Common stock3,500
Retained earnings12,860
29,16029,160
Income Statement
$ (000)
sales36,000
Operating cost (90.11%)32,440
EBIT3,560
Interest560
EBT3,000
Tax (40% of EBT)1,200
Net income1,800
Dividend (45% of net income)810
Retained earnings990

Suppose 2001 sales are projected to increase by 15% over 2000 sales. Assume that the company was operating at full capacity in 2000, that it cannot sell off any of its fixed assets, and that any required financing will be borrowed as notes payable. Also assume that assets, spontaneous liabilities, and operating costs are expected to increase in proportion to sales. Use the percentage of sales method to develop a pro forma balance sheet and income statement for December 31, 2001. Use the pro forma income statement to determine the addition to retained earnings. Interest, Mortgage Bonds and Common Stocks will remain content.

Q17.

Balance Sheet
Assets$ (000)Liabilities & Equity$ (000)
Cash (5%)1,800Accounts payable (20%)7,200
Accounts receivable (30?%)10,800Accruals (7%)3,472
Inventory (35%)12,600Notes payable2,520
Total current assets25,200Total current liabilities13,192
Fixed assets (60%)21,600Mortgage Bonds5,000
Total debt18,192
Common stock2,000
Retained earnings26,608
46,80046,800
Income Statement
$ (000)
sales36,000
Operating cost (85.5%)30,783
EBIT5,217
Interest1,017
EBT4,200
Tax (40% of EBT)1,680
Net income2,520
Dividend (45% of net income)1,512
Retained earnings1,008

Suppose 2001 sales are projected to increase by 20% over 2000 sales. Assume that the company was operating at full capacity in 2000, that it cannot sell off any of its fixed assets, and that any required financing will be borrowed as notes payable. Also assume that assets, spontaneous liabilities, and operating costs are expected to increase in proportion to sales. Use the percentage of sales method to develop a pro forma balance sheet and income statement for December 31, 2001. Use the pro forma income statement to determine the addition to retained earnings. Interest, Mortgage Bonds and Common Stocks will remain content.

Q18. Using the data below calculate the firm’s current and quick ratios for each year.

ITEM2006200720082009
TOTAL CURRENT ASSETS16,95021,90022,50027,000
TOTAL CURRENT LIABELITIES9,00012,60012,60017,400
INVENTORY6,0006,9006,9007,200

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