Apple Two Enterprises expects to generate sales of $5,950,000 for fiscal 2014;sales were $3,450,000 in fiscal 2013.Assume the following figures for the fiscal year ending 2013: cash $70,000;accounts receivable $250,000;inventory $400,000;net fixed assets $520,000;accounts payable $235,000;and accruals $155,000.Use the percent-of-sales method to forecast accruals for the fiscal year ending 2014.
A)$890,001
B)$412,316
C)$267,319
D)$350,814

Question

Quizplus · Accepted Answer

The percent-of-sales method involves calculating the ratio of accruals to sales for 2013 and applying this ratio to the projected sales for 2014. The ratio is $155,000 / $3,450,000 = 0.0449. Applying this ratio to the 2014 sales projection: $5,950,000 * 0.0449 = $267,319.

Apple Two Enterprises Expects to Generate Sales of $5,950,000 for Fiscal