Use the percentage of sales forecasting method to compute the additional financing needed by Lambrechts Specialty Shops, Inc. (LSS), if sales are expected to increase from a current level of $20 million to a new level of $25 million over the coming year. LSS expects earnings after taxes to equal $1 million over the next year. LSS intends to pay a $300,000 dividend next year. The current year balance sheet for LSS is as follows: Lambrechts Specialty Shops, Inc. Balance Sheet as of December 31, 20X3 Cash $1,000,000 Accounts payable $3,000,000 Accounts receivable 1,500,000 Notes payable 3,000,000 inventories 6,000,000 Long-term debt 2,000,000 Net fixed assets 3,000,000 Stockholders’ equity 3,500,000 Total Assets $11,500,000 Total liabilities and equity $11,500,000 All assets, except “cash”, are expected to vary proportionately with sales. Of total liabilities and equity, only “accounts payable” is expected to vary proportionately with sales.
- Use the percentage of sales
forecasting method to compute the additional financing
needed by Lambrechts Specialty Shops, Inc. (LSS), if sales are expected to
increase from a current level of $20 million to a new level of $25 million over the
coming year. LSS expects earnings after taxes to equal $1 million over the next
year. LSS intends to pay a $300,000 dividend next year. The current year
sheet for LSS is as follows:
Lambrechts Specialty Shops, Inc.
Balance Sheet as of December 31, 20X3
Cash $1,000,000 Accounts payable $3,000,000
Accounts receivable 1,500,000 Notes payable 3,000,000
inventories 6,000,000 Long-term debt 2,000,000
Net fixed assets 3,000,000
Total Assets $11,500,000 Total liabilities and equity $11,500,000
All assets, except “cash”, are expected to vary proportionately with sales. Of total liabilities and equity, only “accounts payable” is expected to vary proportionately with sales.
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