Kopp Corporation’s income statement and balance sheet for the year ending December 31, Year 1, are reproduced below:

Additional Information:
1. Purchases in Year 1 are $450,000.
2. In Year 2, management expects 15% sales growth and a 10% increase in all expenses except for depreciation, which increases by 5%.
3. Inventory turnover for Year 1 is 5.0, and management expects an inventory turnover ratio of 6.0 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 on pretax income in Year 1, will be paid in cash.
6. Notes payable of $20,000 will be paid in Year 2.
7. Long-term debt of $25,000 will be repaid in Year 2.
8. Kopp desires a minimum cash balance of $20,000 in Year 2.
9. The ratio of accounts payable to purchases will remain the same in Year 2 as in Year 1.

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

  • CreatedJanuary 22, 2015
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