- It is January 1st, 2014 and Oscar D’Souza has decided to start a new business. He wants to forecast the first year’s Income Statement and Balance sheet. He believes the assumptions below are reasonable – and wants you to assist him by creating the forecasted statements. You agree. Please construct an Income Statement and Balance Sheet from the information provided below. (25 points)
- First year sales will total $100,000
- Gross margins will be 50%
- Operating margins will be 20%
- Accounts Receivables will be about 15% of sales
- Inventory will be 12% of sales
- Accounts Payable will be 5% of sales
- Accrued expenses payable will be 7% of sales
- The Bank of Connecticut will provide a loan of $30,000. The annual interest will be 8%, compounded annually. Interest only payments are needed – until the loan is due in 5 years, where a balloon payment for the full balance must be paid.
- The combined federal and provincial tax rates will be 30%
- Capital equipment purchases will be made at the start of the year. These will total $35,000. These will depreciate at 10% per year
- D’Souza wants ending cash to be $24,500; he feels he needs this on hand at year-end
- D’Souza will provide any other capital needed in the form of equity financing
So my question is Gross Margin is 50% of sales Im assuming so my cost of goods sold would be the difference. Is that what you guys get out of this question?