12/31/12 Balance Sheet

Cash $17,000
Accounts Receivable $12,000
Prepaid Insurance $5,000
Inventory $15,000
$49,000

Equipment $100,000
Accumulated Depreciation $(20,000)
$80,000

Total Assets $129,000

Accounts Payable $9,000
Income Taxes Payable $3,000
Total Liabilities $12,000

Common Stock $100,000
Retained Earnings $17,000
Total Equity $117,000

Total Liabilities & Equity $129,000

Additional Information:
Sales for 2013 are expected to be $200,000.
Accounts Receivable turnover is expected to be 12 times – 30 days of sales in accounts receivable out of a 360 day year (based upon sales and ending 2013 accounts receivable). This would be used to get ending accounts receivable on the 2013 balance sheet – day’s sales in accounts receivable is ending accounts receivable divided by average sales (sales for 2013 divided by 360 days). We can “back into” ending accounts receivables once we have estimated sales. Note that the turnover ratio changes so the turnover ratio at the end of 2012 may have been different than that expected at the end of 2013.
Gross Margin ratio is expected to be 40 percent.
Inventory Turnover is expected to be 12 times – 30 days of cost of sales in ending inventory out of a 360 day year (based upon cost of goods sold and ending 2013 inventory). This would be used to get inventory on the 2013 balance sheet. See accounts receivable above for similar computations.
The cost of ending inventory is expected to be paid next month – ending accounts payable will be same as ending inventory. Or, to state in another way, accounts payable turnover is same as the inventory turnover. The assumption is that only inventory purchases flow through accounts payable – the assumption actually used by most manufacturing/merchandising companies when prepared the statement of cash flows.
Equipment was purchased on 1/1/13 for…