EXCEL PROJECT INSTRUCTIONS
Assume ABC Company has asked you to not only prepare their 2015 year-end Balance Sheet but to also provide pro-forma financial statements for 2016. In addition, they have asked you to evaluate their company based on the pro-forma statements with regard to ratios. They also want you to evaluate 3 projects they are considering. Their information is as follows:
End of the year information:
Account 12/31/15
Ending Balance
Cash 50,000
Accounts Receivable 175,000
Inventory 126,000
Equipment 480,000
Accumulated Depreciation 90,000
Accounts Payable 156,000
Short-term Notes Payable 12,000
Long-term Notes Payable 200,000
Common Stock 235,000
Retained Earnings solve

Additional Information:
• Sales for December total 10,000 units. Each month’s sales are expected to exceed the prior month’s results by 5%. The product’s selling price is $25 per unit.
• Company policy calls for a given month’s ending inventory to equal 80% of the next month’s expected unit sales. The December 31 2015 inventory is 8,400 units, which complies with the policy. The purchase price is $15 per unit.
• Sales representatives’ commissions are 12.5% of sales and are paid in the month of the sales. The sales manager’s monthly salary will be $3,500 in January and $4,000 per month thereafter.
• Monthly general and administrative expenses include $8,000 administrative salaries, $5,000 depreciation, and 0.9% monthly interest on the long-term note payable.
• The company expects 30% of sales to be for cash and the remaining 70% on credit. Receivables are collected in full in the month following the sale (none is collected in the month of sale).
• All merchandise purchases are on credit, and no payables arise from any other transactions. One month’s purchases are fully paid in the next month.

• The minimum ending cash balance for all months is $50,000. If necessary, the company borrows enough cash using a short-term note to reach the minimum. Short-term notes require an interest payment of 1% at each month-end (before any repayment). If the ending cash balance exceeds the minimum, the excess will be applied to repaying the short-term notes payable balance.
• Dividends of $100,000 are to be declared and paid in February.
• No cash payments for income taxes are to be made during the first calendar quarter. Income taxes will be assessed at 35% in the quarter.
• Equipment purchases of $55,000 are scheduled for March.
ABC Company’s management is also considering 3 new projects consisting of the purchase of new equipment. The company has limited resources, and may not be able to complete make all 3 purchases. The information is as follows for the purchases below.
                                    Project 1       Project 2          Project 3
Purchase Price             $80,000       $175,000          $22,700
Required Rate of Return    6%                8%                12%
Time Period                   3 years          5 years             2 years
Cash Flows – Year 1    $48,000          $85,000          $13,000
Cash Flows – Year 2    $36,000          $74,000          $13,000
Cash Flows – Year 3    $22,000          $38,000             N/A
Cash Flows – Year 4          N/A          $26,800             N/A
Cash Flows – Year 5          N/A          $19,000             N/A

Required Action:
Part A:
• Prepare the year-end balance sheet for 2015. Be sure to use proper headings.
• Prepare budgets such that the pro-forma financial statements for the first quarter of 2016 may be prepared.
• Sales budget, including budgeted sales for April.
• Purchases budget, the budgeted cost of goods sold for each month and quarter, and the cost of the March 31 budgeted inventory.
• Selling expense budget.
• General and administrative expense budget.
• Expected cash receipts from customers and the expected March 31 balance of accounts receivable.
• Expected cash payments for purchases and the expected March 31 balance of accounts payable.
• Cash budget.
• Budgeted income statement.
• Budgeted statement of retained earnings.
• Budgeted balance sheet.
Part B:
• Calculate using Excel formulas, the NPV of each of the 3 projects.
• It is possible that ABC Company may not be able to complete all 3 projects. Therefore, advise ABC Company as to the order in which they should pursue the projects (i.e., which project should ABC Company attempt to do first, second, and last).
• Provide justification and analysis as to why you chose the order you did. The analysis must also be done in Excel, not in a separate document.

EXCEL PROJECT INSTRUCTIONS Assume ABC Company has asked you to not...