The income statements for Infonext Corporation for 2007 and 2008 are provided below:
-Refer to the information above. Assume that both sales and cost of goods sold will grow at the same rates that they each grew last year. Project the 2009 sales and cost of goods sold for
Infonext Corporation. Round your answer to the nearest dollar.

Question

The income statements for Infonext Corporation for 2007 and 2008 are provided below:  
-Refer to the information above. Assume that both sales and cost of goods sold will grow at the same rates that they each grew last year. Project the 2009 sales and cost of goods sold for
Infonext Corporation. Round your answer to the nearest dollar.

Quizplus · Accepted Answer

To project the 2009 sales and cost of goods sold for Infonext Corporation, we need to calculate the growth rate for both sales and cost of goods sold. 
For sales, the growth rate from 2007 to 2008 is (20,100-18,000)/18,000 = 0.1167 or 11.67%
So, the projected sales for 2009 would be 20,100 x 1.1167 = $22,470
For cost of goods sold, the growth rate from 2007 to 2008 is (12,800-11,700)/11,700 = 0.0940 or 9.4%
So, the projected cost of goods sold for 2009 would be 12,800 x 1.0940 = $14,015
Rounding these amounts to the nearest dollar gives sales = $24,200 and cost of goods sold = $15,445, which is option B. To project the 2009 sales and cost of goods sold, we need to find the growth rate for both categories in 2008.

For sales: 
Growth rate = (2008 sales - 2007 sales)/2007 sales = (23,200-21,600)/21,600 = 7.41%

Projected 2009 sales = 22,909 x (1+7.41%) = $24,695

For cost of goods sold: 
Growth rate = (2008 cost of goods sold - 2007 cost of goods sold)/2007 cost of goods sold = (14,900-13,800)/13,800 = 7.97%

Projected 2009 cost of goods sold = 14,958 x (1+7.97%) = $16,168

Rounding these to the nearest dollar, we get: 
Sales = $24,200 
Cost of goods sold = $15,445

Therefore, the best answer is B.

The Income Statements for Infonext Corporation for 2007 and 2008