Question 2 [25 points]: You are given comparative income statements and balance sheets for Quaker Qats Company (in millions). Based on the given forecasting assumptions, prepare forecasted income statement, and forecasted balance sheet for year 3. (Show your calculation like A/B=C or (A+B)/C=D etc. in given cells). a. Forecasted Income Statement [10 points): (Show your calculation like A/B=C or (A+B)/C=D etc. in given cells). Quaker Oats Company Income Statement Forecasting step ($ in millions) Year 3 Estimate Year 2 Year 1 Net sales 13,994 14,089 8,375 8,086 5,619 6,003 Cost of goods sold Gross profit Selling, general and administrative expense Depreciation and amortization expense Income before tax 2,665 2,846 740 1,167 2,214 1,990 Income tax expense 725 717 Net income 1,489 1,273 0.02 0.4 Forecasting assumptions (income statement) Sales growth Gross profit margin Selling, general and administrative expense/sales Depreciation expense/Gross prior year PPE Income tax expense/pretax income 0.19 0.12 0.33 b. Forecasted Balance Sheet (15 points): (Show your calculation like A/B=C or (A+B)/C=D etc. in given cells). Quaker Oats Company Balance Sheet Forecasting step ($ in millions) Year 3 Estimate Year 2 Year 1 Cash 246 220 Receivables 2,653 2,400 Inventories 1,718 1,519 Other current assets 874 708 Total current assets 5,491 4,847 PPE 5,900 6,200 Accumulated depreciation 1,686 946 Net PPE 4,214 5,254 Other assets 4,507 4,280 Total assets 14,212 14,381 3,403 3,580 Accounts payable Short term debt and current 2,206 2,100 portion of long-term debt Income tax liabilities 606 550 Total current liabilities 6,215 6,230 4,971 4,569 Long-term debt Total long-term liabilities 4,569 4,971 Common stock 1,367 1,200 2,061 Retained earnings Shareholders' Equity Total liabilities and SHs' 1,980 3,180 3,428 Equity 14,212 14,381 Forecasting assumptions (balance sheet) Accounts receivable turnover rate 5.28 Inventory turnover rate 4.87 Other current assets no change CAPEX (in millions) 740 Other assets no change 2.46 no change Accounts payable turnover rate Short term debt and current portion of LT debt Taxes payable/tax expense Long term debt Common stock 0.84 no change no change Dividend payments (in millions) 1,100 Question 2 [25 points]: You are given comparative income statements and balance sheets for Quaker Qats Company (in millions). Based on the given forecasting assumptions, prepare forecasted income statement, and forecasted balance sheet for year 3. (Show your calculation like A/B=C or (A+B)/C=D etc. in given cells). a. Forecasted Income Statement [10 points): (Show your calculation like A/B=C or (A+B)/C=D etc. in given cells). Quaker Oats Company Income Statement Forecasting step ($ in millions) Year 3 Estimate Year 2 Year 1 Net sales 13,994 14,089 8,375 8,086 5,619 6,003 Cost of goods sold Gross profit Selling, general and administrative expense Depreciation and amortization expense Income before tax 2,665 2,846 740 1,167 2,214 1,990 Income tax expense 725 717 Net income 1,489 1,273 0.02 0.4 Forecasting assumptions (income statement) Sales growth Gross profit margin Selling, general and administrative expense/sales Depreciation expense/Gross prior year PPE Income tax expense/pretax income 0.19 0.12 0.33 b. Forecasted Balance Sheet (15 points): (Show your calculation like A/B=C or (A+B)/C=D etc. in given cells). Quaker Oats Company Balance Sheet Forecasting step ($ in millions) Year 3 Estimate Year 2 Year 1 Cash 246 220 Receivables 2,653 2,400 Inventories 1,718 1,519 Other current assets 874 708 Total current assets 5,491 4,847 PPE 5,900 6,200 Accumulated depreciation 1,686 946 Net PPE 4,214 5,254 Other assets 4,507 4,280 Total assets 14,212 14,381 3,403 3,580 Accounts payable Short term debt and current 2,206 2,100 portion of long-term debt Income tax liabilities 606 550 Total current liabilities 6,215 6,230 4,971 4,569 Long-term debt Total long-term liabilities 4,569 4,971 Common stock 1,367 1,200 2,061 Retained earnings Shareholders' Equity Total liabilities and SHs' 1,980 3,180 3,428 Equity 14,212 14,381 Forecasting assumptions (balance sheet) Accounts receivable turnover rate 5.28 Inventory turnover rate 4.87 Other current assets no change CAPEX (in millions) 740 Other assets no change 2.46 no change Accounts payable turnover rate Short term debt and current portion of LT debt Taxes payable/tax expense Long term debt Common stock 0.84 no change no change Dividend payments (in millions) 1,100