Liberty BMAL530 Excel Project 2019

EXCEL PROJECT INSTRUCTIONS

Assume ABC Company has asked you to not only prepare their
2017 year-end Balance Sheet but to also provide pro-forma financial statements
for 2018. 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 12/31/17

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 2017
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.

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• 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

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Required Action:

Part A:

• Prepare the year-end balance sheet for 2017. Be sure to
use proper headings.

• Prepare budgets such that the pro-forma financial
statements for the first quarter of 2018 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.

This assignment must be submitted as 1 Excel document.

This assignment is due by 11:59 p.m. (ET) on Sunday of
Module/Week 7.