INSTRUCTIONS:

Using the $2024$ trial balance and additional information below, prepare the projected $(2025)$ financial statements for Walnut Grove. The prior year data $($provided$)$ is the starting point for your projections, and then each of the assumptions listed below will also be used.

Prepare an Excel workbook which contains the following information:

$-$ Tab $1$: $2024$ Trial Balance $($provided in this document$)$

$-$ Tab $2$: $2025$ Projected Income Statement

$-$ Tab $3$: $2025$ Projected Balance Sheet

$-$ Tab $4$: $2025$ Projected Statement of Cash Flows Assumptions:

$1.$ Sales will change as follows:

a$.$ Material $\backslash$& Supplies Sales will increase $5\mathrm{.}1\backslash \%$

b$.$ Small Tool Sales will increase $\backslash (2\mathrm{.}8\backslash \%\backslash )$

c$.$ Tool Rental Revenue will continue throughout the $2025$ year. An average of $18$ tools will be rented each week. The weekly rental per tool is $\backslash (\backslash$$ $35\backslash ).$ Assume that the average number of tools given will be rented for all $52$ weeks.

$2.$ Cost of sales for materials and supplies and small tools will increase proportionately based on their current percentage of sales, respectively. $($HINT: You will need to use vertical analysis.$)$

$3.$ Small tools expense, including blades and other items, is expected to total $\backslash$$$7,800$ in $2025.$

$4.$ Office supplies and postage are expected to increase by $\backslash (5\mathrm{.}0\backslash \%\backslash )$ during $2025.$

$5.$ On January $1$st$,$ the company will invest $\backslash (\backslash$$ $145,000\backslash )$ in new equipment for its custom cabinet division.

a$.$ This equipment will have a $5-$year life and should be depreciated using the straight$-$line method. This purchase represents the only expected change to property, plant, and equipment.

b$.$ The company will finance the equipment purchased with a $5-$year note at $\backslash (6\mathrm{.}75\backslash \%\backslash )$ interest. You will need to use an amortization schedule to find the principal and interest payment amounts. The loan is paid monthly. $6.$ In relation to $\backslash$#$5$ above, the custom cabinet sales division begins operations in $2025.$ The following assumptions must be used to project the impact on the financial statements.

$($Hint: You may need to add accounts to the trial balance.$)$

a$.$ Walnut Grove anticipates that it will sell $165$ cabinets at an average selling price of $\backslash (\backslash$$ $2,500\backslash ).$

b$.$ Direct materials per cabinet are $\backslash (\backslash$$ $800\backslash )$ per unit.

c$.$ The direct labor per cabinet is $5$ hours, and Walnut Grove pays $\backslash (\backslash$$ $27\mathrm{.}50/\backslash )$ hour for this labor.

d$.$ Factory overhead is calculated at $\backslash (40\backslash \%\backslash )$ of direct labor.

$7.$ The building is being depreciated over a $39-$year life, the computers and software are being depreciated over a $3-$year life, and the furniture and fixtures are being depreciated over a $5-$year life, all using straight$-$line depreciation.

$8.$ Because of the new cabinet division, annual insurance costs will increase to $\backslash (\backslash$$ $22,000\backslash ),$ effective January $1.$ The company prepaid $2$ years of this insurance and received a $3\mathrm{.}5\backslash \%$ discount for the $2-$year prepayment.

$9.$ On January $1,$ a new cabinet division manager will be hired at a cost of $\backslash (\backslash$$ $60,000\backslash ).$ In additional to the new cabinet division manager, $3$ new employees will be hired at an average wage of $\backslash (\backslash$$ $20\mathrm{.}50\backslash )$ per hour, employees work an average of $40$ hours per week. Payroll taxes and benefits should be calculated at $\backslash (20\backslash \%\backslash )$ of wages.

$10.$ With $20$ weeks remaining in the year, $2$ additional employees will be hired at a rate of $\backslash (\backslash$$ $17\mathrm{.}50\backslash )$ per hour, based on an average of $35$ hours per week.

$11.$ The income tax rate is $\backslash (25\backslash \%\backslash ).$

$12.$ At the end of the year, Walnut Grove will have $\backslash (\backslash$$ $30,000\backslash )$ in ending inventory.

$13.$ In relation $\backslash$#$12,$ purchases are made evenly throughout the year and are paid in full in the month following purchase.

$14.$ Sales are collected in full the month following the sale. During the month of December, invoiced sales totaled $\backslash$$$125,000.$

$15.$ The sales tax rate is $\backslash (4\mathrm{.}5\backslash \%\backslash ).$

$16.$ At the end of the year, Walnut Grove has received full payment for $20$ custom cabinet orders that will be completed in January $2026.$ WALNUT GROVE

TRIAL BALANCE

For the Years Ended December $31,2024$ and $2025$ Walnut Grove

Projected Income Statement

For the Year Ended December $31,2025$

Walnut Grove

Projected Balance Sheet

As of December $31,2025$

Walnut Grove

Projected Statement of Cash Flows

For the Year Ended December $31,2025$