A firm has the following account balances for this year. Sales for the year are $420,000. Projected sales for next year are $441,000. 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 $23,500 next year. Retained earnings is expected to increase by $5,400 next year. What is the projected external financing need?
A) -$14,150
B) -$6,850
C) $32,850
D) $36,000
E) $56,350

Question

A firm has the following account balances for this year. Sales for the year are $420,000. Projected sales for next year are $441,000. 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 $23,500 next year. Retained earnings is expected to increase by $5,400 next year. What is the projected external financing need? 
A) -$14,150 
B) -$6,850 
C) $32,850 
D) $36,000 
E) $56,350

Quizplus · Accepted Answer

The Answer of A firm has the following account balances for this year. Sales for the year are $420,000. Projected sales for next year are $441,000. 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 $23,500 next year. Retained earnings is expected to increase by $5,400 next year. What is the projected external financing need? 
A) -$14,150 
B) -$6,850 
C) $32,850 
D) $36,000 
E) $56,350

A Firm Has the Following Account Balances for This Year