Here are the abbreviated financial statements for Planners Peanuts: Sales Cost I

Question

Here are the abbreviated financial statements for Planners Peanuts: Sales Cost INCOME STATEMENT, 2012 $9,000 7,100 Net income $1,900 BALANCE SHEET, YEAR-END 2011 2012 2011 2012 $ 6,500 $ 9,500 Debt$ 853 $ 1,000 5,647 8,500 Assets Equity Total 6,500 $ 9,500 Total 6,500 9,500 If sales increase by 25% in 2013 and the company uses a strict percentage of sales planning model (meaning that all items on the income and balance sheet also increase by 25%. The balancing item is (Click to select) increases by $ . If net income next year is $ and equity then (Click to select) must be $

Explanation / Answer

Equity at end of 2013 : Equity 2012 (1+%)

= 8500 [1+.25)

= 10625

The balancing item is Dividend.If net income next year is 2375 [1900(1+.25)] and equity increases by 2125 [10625-8500] ,then dividend must be 250 [2375-2125]

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