Help with my Financial Accounting Class

[AACJ]

So I am a night school student and I'm taking Financial Accounting. I can figure out most everything else on this but I do not know how the Interest (cell I6) is calculated. All of the values were stated in my textbook, Operating Costs are 55% of Sales and the tax rate is 40%.

HELP! An excel formula would be ideal if possible.

 

[mretzloff]

I think the interest must be given. Is there a separate file or sheet that gives you some liabilities and an interest rate? If so, click on cell I8 (your interest) and click F2 to see if the cell if pulling information from other cells.

Oh, and make sure to put two bars below the $1,320,000 for net income. That means the calculations stop and is a necessary part of accounting.

 

[AACJ]

I think the interest must be given. Is there a separate file or sheet that gives you some liabilities and an interest rate? If so, click on cell I8 (your interest) and click F2 to see if the cell if pulling information from other cells.

Oh, and make sure to put two bars below the $1,320,000 for net income. That means the calculations stop and is a necessary part of accounting.

I actually put all this information in the spreadsheet myself with the given values from the text, there are calculation I made already for the given percentages. What I did NOT state was that the actual problem wants me to find out what the sales should be if they wanted their Net Income to be 2,500,000.00. It also stated that the depreciation and amortization AND Interest would increase by 10%.

Now if this was a given number, I would assume the Interest would just become 660,000.00 but I thought it was part of a calculation. If it's just a stated number, that makes things a LOT easier.

Point taken on the double lines too. Thanks!

 

[cb91710]

Okay, so the interest is proportional to D&A.
D&A is currently 10% of sales
Interest is currently 7.5% of sales.

So D&A and interest increase by 10%, it stands that the solution equals an increase in sales of 10% to bring net to 2.5m.

That doesn't make sense, because you are wanting to double the bottom line, which means that operating costs will also double, plus the increase in taxes.
You would need to more than double sales to double bottom line since operating costs are 55% of sales.

It seems that some key information is missing.

 

[AACJ]

Here is the actual problem:

 

[jrward2]

Sales should be 12,681,481.48

PM me your email and I'll send you my excel work that shows what I did. I'm currently studying for the CPA and this was a nice break from studying audit. I really enjoy financial accounting

 

[AACJ]

Sales should be 12,681,481.48

PM me your email and I'll send you my excel work that shows what I did. I'm currently studying for the CPA and this was a nice break from studying audit. I really enjoy financial accounting

That is actually the answer I came up with, I basically worked it backwards. I guess the biggest question I had was whether the Dep and Amort along with Interest was 10% of another value or combination of values. OR if I was to just increase the GIVEN values from the text by 10%. I was assuming (a bad one on my part) that the Dep/Amort and Interest was part of a calculation, it sounds like it is not from your explanation.

 

[PFP_Dad]

Fun problem. I have this class next semester, but I wasn't able to solve it either.

 

[jrward2]

Actually for got I had a screen shot tool

 

[AACJ]

Fun problem. I have this class next semester, but I wasn't able to solve it either.

What book are you going to use? They are expensive!!!

 

[cb91710]

Ahh... It's not a formula based on sales, at least not one that is revealed.
The parameters of the problem assume that those items will increase by 10%, so you can safely replace 800,000 and 600,000 with 880,000 and 660,000 and work from there.
In this simplified problem, it looks like they are basing interest on finance charges paid on materials purchased on credit, so it would more accurately tie into the operating costs, but we don't have the breakdown on COGS isolating materials from labor, utilities, and other costs. These costs are a combination of fixed and variable costs (and because of this, it truly is not accurate to forecast line 2 as 55% of sales).

 

[PFP_Dad]

Actually for got I had a screen shot tool

I know it's not my problem, but thanks for the screenshot.

 

[cb91710]

Actually for got I had a screen shot tool

View attachment 304033

That's where I was too.

Was going to post it, but decided to let him do the math

 

[PFP_Dad]

What book are you going to use? They are expensive!!!

Not sure, I won't find out for about a month yet.

 

[jrward2]

That is actually the answer I came up with, I basically worked it backwards. I guess the biggest question I had was whether the Dep and Amort along with Interest was 10% of another value or combination of values. OR if I was to just increase the GIVEN values from the text by 10%. I was assuming (a bad one on my part) that the Dep/Amort and Interest was part of a calculation, it sounds like it is not from your explanation.

Yeah the 10% increase to depreciation/amortization would a % increase from the prior year. So all you would need to do would be 1.10 time prior year to get the projected amount. The only other way to calculate it is if the problem stated the assets, method of depreciation, and useful life.

 

[Go West Young Man]

The OP might lose a few points for turning their assignment in late...

 

[Go West Young Man]

Ok, he deleted his post to make me look crazy
Someone answered a question in the thread, but 9 years after it was asked.

 

[Intrigued]

Ok, he deleted his post to make me look crazy
Someone answered a question in the thread, but 9 years after it was asked.

I don't know if you're crazy... but I saw his post before he deleted it.


When I first started reading this this thread yesterday I was happy to see some posts from members that I hadn't seen post in a long time, then I noticed the dates...