Fax Corporations income statement and balance sheet for the year ended December 31, Year 1, are reproduced below FAX CORPORATION Income Statement For Year Ended December 31, Year 1 FAX CORPORATION Balance Sheet December 31, Year 1 Additional Information 1 Purchases in Year 1 are $480,000 2 In Year ...

a FAX Corporation Forecasted Statement of Cash Receipts and Payments For Year Ended December 31 Year ...

Fax Corporations income statement and balance sheet for the year ended December 31, Year 1, are reproduced

Question:

Fax Corporation€™s income statement and for the year ended December 31, Year 1, are reproduced below:
FAX Statement
For Year Ended December 31, Year 1

Fax Corporation€™s income statement and balance sheet for the year

FAX CORPORATION
Balance Sheet
December 31, Year 1

Additional Information:
1. Purchases in Year 1 are $480,000.
2. In Year 2, management expects 15% sales growth and a 10% increase in all expenses except for depreciation, which increases by 5%.
3. Management expects an inventory turnover ratio of 5.5 for Year 2.
4. A receivable collection period of 90 days, based on year-end-accounts receivable, is planned for Year 2.
5. Year 2 income taxes, at the same rate of pretax income for Year 1, will be paid in cash.
6. Notes payable at the end of Year 2 will be $30,000.
7. Long-term debt of $25,000 will be paid in Year 2.
8. FAX desires a minimum cash balance of $20,000 in Year 2.
9. The ratio of accounts payable to purchases for Year 2 is the same as in Year 1.
10. All selling and administrative expenses will be paid in cash in Year 2.
11. Marketable securities and equity accounts at the end of Year 2 are the same as in Year 1.

Required:
a. Prepare a statement of forecasted cash inflows and outflows (what-if analysis) for the year ended December 31, Year 2.
b. Will FAX Corporation have to borrow money in Year2?

Inventory Turnover Ratio
Inventory Turnover RatioThe inventory turnover ratio is a ratio of cost of goods sold to its average inventory. It is measured in times with respect to the cost of goods sold in a year normally. Inventory Turnover Ratio FormulaWhere,... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...