Use the following information and the percent-of-sales method to answer the foll
ID: 2680906 • Letter: U
Question
Use the following information and the percent-of-sales method to answer the following question(s). Below is the 2004 year-end balance sheet for Banner, Inc. Sales for 2004 were $1,600,000 and are expected to be $2,000,000 during 2005. In addition, we know that Banner plans to pay $90,000 in 2005 dividends and expects projected net income of 4% of sales. (For consistency with the Answer selections provided, round your forecast percentages to two decimals.)Banner, Inc. Balance Sheet
December 31, 2004
Assets
Current assets $890,000
Net fixed assets 1,000,000
Total $1,890,000
Liabilities and Owners' Equity
Accounts payable $160,000
Accrued expenses 100,000
Notes payable 700,000
Long-term debt 300,000
Total liabilities 1,260,000
Common stock (plus paid-in capital) 360,000
Retained earnings 270,000
Common equity 630,000
Total 1,890,000
Banner's projected current assets for 2005 are:
Answer
A$1,500,000.
B$1,112,500.
C$1,260,000.
D$1,000,000.
Banner's projected fixed assets for 2005 are:
Answer
A$1,125,000.
B$1,250,000.
C$2,385,000.
D$1,000,000.
Banner's projected accounts payable balance for 2005 is:
Answer
A$200,000.
B$160,000.
C$120,000.
D$300,000.
Banner's projected accrued expenses for 2005 are:
Answer
A$125,000.
B$225,000.
C$165,000.
D$100,000.
Banner's projected long-term debt for 2005 is:
Answer
A$700,000.
B$300,000.
C$380,000.
D$880,000.
Banner's projected retained earnings for 2005 are:
Answer
A$350,000.
B$280,000.
C$260,000.
D$340,000.
Banner's projected discretionary financing needed for 2005 is:
Answer
A$360,000.
B$367,420.
C$427,500.
D$417,500.
Explanation / Answer
Banner's projected current assets for 2005 are: B$1,112,500. Banner's projected fixed assets for 2005 are: B$1,250,000. Banner's projected accounts payable balance for 2005 is: A$200,000. Banner's projected accrued expenses for 2005 are: B$225,000. Banner's projected long-term debt for 2005 is: C$380,000. Banner's projected retained earnings for 2005 are: C$260,000. Banner's projected discretionary financing needed for 2005 is: D$417,500.