Selected assumptions for 2018 Sales growth rate 9 % Cost of goods sold/Sales 62 % Dividends/Net income 40 % Income Statement Balance Sheet Actual Forecast Actual Forecast 2017 2018 2017 2018 Sales $ 1,000 Cash $ 100 Cost of goods sold 600 Accounts receivable 200 Operating expense 200 Inventory 500 Depreciation expense 100 Total Current Assets 800 EBIT 100 Net PP&E 1,000 Interest expense 35 Total Assets 1,800 Pre-tax income 65 Accounts payable 300 Tax 26 Bank loan 100 Net Income $ 39 Total Current Liabilities 400 Long-Term Debt 400 Shareholders' Equity 1,000 Total Liabilities & Equity $ 1,800 Please refer to the spreadsheet above. Selected assumptions are given for preparing pro forma financial statements for 2018. Which of the following formulas would correctly give the forecast for sales in cell C8?

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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Selected assumptions for 2018
Sales growth rate	9	%
Cost of goods sold/Sales	62	%
Dividends/Net income	40	%

Income Statement		Balance Sheet
	Actual		Forecast	Actual	Forecast
	2017		2018	2017	2018
Sales	$	1,000				Cash	$	100
Cost of goods sold		600				Accounts receivable		200
Operating expense		200				Inventory		500
Depreciation expense		100				Total Current Assets		800
EBIT		100				Net PP&E		1,000
Interest expense		35				Total Assets		1,800
Pre-tax income		65				Accounts payable		300
Tax		26				Bank loan		100
Net Income	$	39				Total Current Liabilities		400
						Long-Term Debt		400
						Shareholders' Equity		1,000
						Total Liabilities & Equity	$	1,800

Please refer to the spreadsheet above. Selected assumptions are given for preparing pro forma financial statements for 2018. Which of the following formulas would correctly give the forecast for sales in cell C8?

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