Refer to the financial statements of United Parcel Service in PS-41 to answer the following requirements. The following assumptions should be useful: UPS's sales forecast for 2018 is $70,000 million.

• Operating expenses and operating profits increase in proportion to sales. Investment income and interest expense are unchanged in 2018.

• Income taxes are 25% of pretax earnings.

• Marketable securities and noncurrent investments are unchanged in 2018; all other assets (except cash) increase in proportion to sales. Long-term debt and current maturities of long-term debt are unchanged in 2018; all other liabilities increase in proportion to sales.

• Dividends are 50% of net income. Income and dividends are the only changes to stockholders· equity in 2018.

REQUIRED:

a. Prepare an income statement forecast for 2018.

b. Prepare a balance sheet forecast for 2018.

Data from PS-41:

Transcribed Image Text:

UNITED PARCEL SERVICE, INC. income Statement Years Ended December 31 ($ millions) 2017 2016 2015 S60,906 Revenue.... Operating expenses: Compensation and benefits.. Repairs and maintenance. Depreciation and amortization. Purchased transportation. $65,872 $58,363 34,588 34,770 31,028 ... 1,600 1,538 2,282 10,989 2,690 1,155 5,039 1,400 2,084 8,043 2,482 1,022 4,636 2,224 9,129 2,118 .... Fuel.... Other occupancy Other expenses 1,037 .... 4,623 Total operating expenses. 58,343 55,439 50,695 Operating profit.... Other income and (expense): Investment income and other.. Interest expense.... Total other income and (expense). 7,529 5,467 7,668 72 50 15 (453) (381) (341) (381) (331) (326) Income before income taxes 7,342 7,148 2,238 5,136 1,705 Income tax expense. 2,498 Net income... $ 4,910 $ 3,431 $ 4,844