Use the following information and the percent-of-sales method to answer the foll

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

B. C. B. C. A. D. D.

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