Abbreviated financial statements for Archiemedes Levers are shown in below. If s

Question

Abbreviated financial statements for Archiemedes Levers are shown in below. If sales increased by 10% in 2011 and all other items, including debt, increase correspondingly what must be the balancing item? What will be its value?
Income Statement
Sales                                                $4000
Costs, including interests                   $3500
Net income                                         $500

                                                    Balance Sheet, Year End
                                     2010              2009                                   2010                              2009
Assets                            $3200             $2700           Debt               $1200                           $1033
                                                                                Equity             $2000                            $1667
Total                             $3200            $2700           Total             $3200                             $2700

Explanation / Answer

      The sales are increased in 2011. Therefore the value of the debt is also increased,        Income statement 2010 2011 Sales $40,000 $44,000 Costs, including interests $35,000 $38,500 Net income $500 $5,500 Year ended balance sheet 2010 2011 2010 2011 Assets $3,200 $3,520.0 Debt $1,200 $1,320.0 Total $3,200 $3,520.0 Equity $2,000 $2,200.0 Total $3,520.0 Income statement 2010 2011 Sales $40,000 $44,000 Costs, including interests $35,000 $38,500 Net income $500 $5,500

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