(12-8) Stevens Textile Corporation’s 2016 financial statements are shown below: Balance Sheet as of December 31, 2016...

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Finance

(12-8) Stevens Textile Corporation’s 2016 financial statementsare shown below:
Balance Sheet as of December 31, 2016 (Thousands ofDollars)
Cash                                       $ 1,080        Accountspayable                     $ 4,320
Receivables                               6,480       Accruals                                            2,880
Inventories                               9,000        Line ofcredit                                            0
Total current assets             $16,560       Notes payable                                2,100
Net fixed assets                       12,600       Total currentliabilities            $ 9,300
                                                                         Mortgagebonds                            3,500
                                                                         Common stock                                 3,500
                                                  ______         Retainedearnings                           12,860
   Total assets                        $29,160          Totalliabilities and equity       $29,160
Income Statement for December 31, 2016 (Thousands ofDollars)
Sales                                                             $36,000
Operating costs                                             32,440
Earnings before interest andtaxes           $3,560
Interest                                                                 460
Pre-taxearnings                                           $ 3,100
Taxes (40%)                                                      1,240
Net income                                                    $ 1,860
Dividends(45%)                                              $ 837
Addition to retained earnings                     $ 1,023
a. Suppose 2017 sales are projected to increase by 15% over 2016sales. Use the
forecasted financial statement method to forecast a balancesheet and income
statement for December 31, 2017. The interest rate on all debtis 10%, and cash
earns no interest income. Assume that all additional debt in theform of a line of
credit is added at the end of the year, which means that youshould base the
forecasted interest expense on the balance of debt at thebeginning of the year. Use
the forecasted income statement to determine the addition toretained earnings.
Assume that the company was operating at full capacity in 2016,that it cannot sell
off any of its fixed assets, and that any required financingwill be borrowed as
notes payable. Also, assume that assets, spontaneousliabilities, and operating costs
are expected to increase by the same percentage as sales.Determine the additional
funds needed.
b. What is the resulting total forecasted amount of the line ofcredit?

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(12-8) Stevens Textile Corporation’s 2016 financial statementsare shown below:Balance Sheet as of December 31, 2016 (Thousands ofDollars)Cash $ 1,080 Accountspayable $ 4,320Receivables 6,480 Accruals 2,880Inventories 9,000 Line ofcredit 0Total current assets $16,560 Notes payable 2,100Net fixed assets 12,600 Total currentliabilities $ 9,300 Mortgagebonds 3,500 Common stock 3,500 ______ Retainedearnings 12,860 Total assets $29,160 Totalliabilities and equity $29,160Income Statement for December 31, 2016 (Thousands ofDollars)Sales $36,000Operating costs 32,440Earnings before interest andtaxes $3,560Interest 460Pre-taxearnings $ 3,100Taxes (40%) 1,240Net income $ 1,860Dividends(45%) $ 837Addition to retained earnings $ 1,023a. Suppose 2017 sales are projected to increase by 15% over 2016sales. Use theforecasted financial statement method to forecast a balancesheet and incomestatement for December 31, 2017. The interest rate on all debtis 10%, and cashearns no interest income. Assume that all additional debt in theform of a line ofcredit is added at the end of the year, which means that youshould base theforecasted interest expense on the balance of debt at thebeginning of the year. Usethe forecasted income statement to determine the addition toretained earnings.Assume that the company was operating at full capacity in 2016,that it cannot selloff any of its fixed assets, and that any required financingwill be borrowed asnotes payable. Also, assume that assets, spontaneousliabilities, and operating costsare expected to increase by the same percentage as sales.Determine the additionalfunds needed.b. What is the resulting total forecasted amount of the line ofcredit?