Jill\'s Wigs Inc. had the following balance sheet last year: Cash $800 Accounts
ID: 2714190 • Letter: J
Question
Jill's Wigs Inc. had the following balance sheet last year: Cash $800 Accounts payable $350 Accounts receivable $450 Accrued wages $150 Inventory $950 Notes payable $2,000 Net fixed assets $34,000 Mortgage $26,500 Common stock $3,200 Retained earnings $4,000 Total liabilities Total assets $36,200 and equity $36,200 Jill has just invented a nonslip wig for cancer patients which she expects will cause sales to double from $10,000 to $20,000, increasing net income to $1,000. She feels that she can handle the increase without adding any fixed assets. How much outside capital will Jill need if she pays no dividends? Jill's Wigs Inc. had the following balance sheet last year: Cash $800 Accounts payable $350 Accounts receivable $450 Accrued wages $150 Inventory $950 Notes payable $2,000 Net fixed assets $34,000 Mortgage $26,500 Common stock $3,200 Retained earnings $4,000 Total liabilities Total assets $36,200 and equity $36,200 Jill has just invented a nonslip wig for cancer patients which she expects will cause sales to double from $10,000 to $20,000, increasing net income to $1,000. She feels that she can handle the increase without adding any fixed assets. How much outside capital will Jill need if she pays no dividends?Explanation / Answer
$700
Additional funds needed
Balance Sheet solution:
Pro Forma Balance Sheet
Cash $ 1,600 Accounts payable $ 700
Accounts receivable 900 Accrued wages 300
Inventory 1,900 Notes payable 2,000
Net fixed assets 34,000 Mortgage 26,500
Common stock 3,200
Retained earnings 5,000
Total liabilities
. Total assets $38,400 & equity $37,700
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AFN = $38,400 - $37,700 = $700.
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