Edman Company is a merchandiser that has provided the following balance sheet and income statement for this year.

		Beginning Balance			Ending Balance
Assets
Cash	$	62,800		$	150,000
Accounts receivable		160,000			180,000
Inventory		230,000			240,000
Property, plant & equipment (net)		833,000			793,000
Other assets		37,000			37,000
Total assets	$	1,322,800		$	1,400,000
Liabilities & Stockholders’ Equity
Accounts payable	$	70,000		$	80,000
Bonds payable		550,000			550,000
Common stock		410,000			410,000
Retained earnings		292,800			360,000
Total liabilities & stockholders’ equity	$	1,322,800		$	1,400,000

		This Year
Sales	$	2,500,000
Variable expenses:
Cost of goods sold		1,600,000
Variable selling expense		240,000
Total variable expenses		1,840,000
Contribution margin		660,000
Fixed expenses:
Fixed selling expenses		220,000
Fixed administrative expenses		300,000
Total fixed expenses		520,000
Net operating income		140,000
Interest expense (8%)		44,000
Net income before tax		96,000
Tax expense (30%)		28,800
Net income	$	67,200

Req A
1. Inventory _____

2. Accounts Payable _____

3. Retained Earnings ____

Reg B

1. Inventory ____

2. Accounts Payable ____

3. Retained Earnings ____

Reg C

1. What is the company’s estimated average total liabilities and stockholders’ equity for next year?

To evaluate alternative 1, refer to the “Requirement 3 Financials” tab within your template. Assume the company streamlines it working capital management practices with the following estimated impacts:

• Next year’s ending balance in accounts receivable decreases by $80,000 compared to its beginning balance.
• Next year’s ending balance in inventory decreases by $120,000 compared to its beginning balance.
• Next year’s ending balance in property, plant, and equipment (net) decreases by $40,000 compared to its beginning balance to reflect next year’s depreciation expense.
• Next year’s ending balance in accounts payable decreases by $40,000 compared to its beginning balance.
• Next year’s ending balance in bonds payable decreases by $300,000 compared to its beginning balance to reflect a retirement of bonds payable.
• Next year’s ending balances in other assets and common stock are the same as their beginning balances.
• Next year’s total sales, variables expenses, fixed expenses, and net operating income are the same as this year.

a. Based on the above estimated impacts, use Excel formulas to calculate ending balances as needed in column C. What is the ending balance in the following accounts?

b. Create formulas within column D that calculate next year’s average balances for all balance sheet accounts (except Cash which will automatically be computed for you). What is the average balance in the following accounts?

c. What is the company’s estimated average total liabilities and stockholders’ equity for next year?