Question 31Decker EnterprisesBelow are the simplified current and projected financial statements for Decker Enterprises. All of Decker's assets are operating assets. All of Decker's current liabilities are operating liabilities. Income statementCurrentProjected Salesna 1,500 Costsna 1,080 Profit before taxna 420 Taxes (25%)na 105 Net incomena 315 Dividendsna 95 Balance sheetsCurrentProjected CurrentProjectedCurrent assets 100 115 Current liabilities 70 81Net fixed assets 1,200 1,440 Long-term debt 300 360 Common stock 500 500 Retained earnings 430 650 If Decker had a financing deficit, it could remedy the situation by a.buying back common stock b.borrowing on its line of credit c.paying a special dividend d.borrowing from retained earnings e.paying down its long-term debt

Deficit means the expenditures are in excess of incomes. Financing deficit means arranging finance…

Answered: If Decker had a financing deficit, it…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question 31

Decker Enterprises
Below are the simplified current and projected financial statements for Decker Enterprises. All of Decker's assets are operating assets. All of Decker's current liabilities are operating liabilities.

Income statement	Current	Projected
Sales	na	1,500
Costs	na	1,080
Profit before tax	na	420
Taxes (25%)	na	105
Net income	na	315
Dividends	na	95

Balance sheets	Current	Projected		Current	Projected
Current assets	100	115	Current liabilities	70	81
Net fixed assets	1,200	1,440	Long-term debt	300	360
			Common stock	500	500
			Retained earnings	430	650

If Decker had a financing deficit, it could remedy the situation by

	a.	buying back common stock
	b.	borrowing on its line of credit
	c.	paying a special dividend
	d.	borrowing from retained earnings
	e.	paying down its long-term debt

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