A firm has the following account balances for this year.Sales for the year are $500,000.Projected sales for next year are $545,000.The percentage of sales approach is used for pro forma purposes.All balance sheet accounts,except long-term debt and common stock,change according to that approach.The firm plans to decrease the long-term debt balance by $5,000 next year.Retained earnings is expected to increase by $3,500 next year.What is the projected external financing need?

A) $10,520
B) $14,720
C) $18,520
D) $20,720
E) $25,620

Question

A firm has the following account balances for this year.Sales for the year are $500,000.Projected sales for next year are $545,000.The percentage of sales approach is used for pro forma purposes.All balance sheet accounts,except long-term debt and common stock,change according to that approach.The firm plans to decrease the long-term debt balance by $5,000 next year.Retained earnings is expected to increase by $3,500 next year.What is the projected external financing need?

A) $10,520 
B) $14,720 
C) $18,520 
D) $20,720 
E) $25,620

Quizplus · Accepted Answer

11ea6d0e_c3d0_28c4_b3c7_3be7ab6e942f_TB1223_00

A Firm Has the Following Account Balances for This Year