Income Statement (2016)1.000(800)Balance Sheet (2016)160 Accounts Payable440 Short-Term Debt600 Long-Term Debt1.800 Common StockCredit Sales300100800800Retained Eamings 1.0003.000CashAccounts ReceivableCost of Goods SoldTaxable IncomeTaxes (34%)Net IncomeInventoryFixed AssetsTotal3.000 TotalDividend (33.33%)Retained EarningsMain assumptionsSales are expected to increase by 25% in 2017."Cost of goods sold is a fraction of sales in the income statement. All other items are independentof salesEach current asset and accounts payable are fractions of sales in the balance sheet. All otheritems are independent of sales.If there is a need for external funding:o raise funds through short term debt first, but current ratio must not be smaller than 3.o raise the remaining funds through 50% long-term debt and 50% equity offering (commonstock).Xouasafinancial.managerare.assianed.to.anplx.nercentage.ot.sales.method.andta.prepare the pro.fomma.income.statementand balance sheet for vear 2017. Suppose.that.KOu.setihe.cucent.catio.fat.2017.as.exactix.3.How.much.additional.short.tem.debt.should.be raised in 20172 (retained earnings for 2016:88)25354555

The correct answer is:- Option b) 35

Xaunasatinancialmanager..are.assigned.to.anplx.nercentage.at.sales.method.and.ta Dcenate,the.Rta.farma.income.statementand balance.sheet.for.xeat.2017. Suppose that. KOU.set.the.curtent.catio.fat.2017.as.exactix.3.Haw.much.additional.short.teM.dekt.should. besaised in 20172iretained earnings for 2016:88) 25 35 45 55

Xaunasatinancialmanager..are.assigned.to.anplx.nercentage.at.sales.method.and.ta Dcenate,the.Rta.farma.income.statementand balance.sheet.for.xeat.2017. Suppose that. KOU.set.the.curtent.catio.fat.2017.as.exactix.3.Haw.much.additional.short.teM.dekt.should. besaised in 20172iretained earnings for 2016:88) 25 35 45 55

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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