You are the most creative analyst for Black Sheep Broadcasting Company, and your admirers want to see you work your analytical magic once more.   2016 Actual Results 2017 Initial Forecast Net sales $16,000 $24,000 Cost of goods sold (12,800) (19,200) Gross profit $3,200 $4,800 Fixed operating costs except depreciation (800) (1,200) Depreciation (320) (480) Earnings before interest and taxes $2,080 $3,120 Interest (320) (320) Earnings before taxes $1,760 $2,800 Taxes (704) (1,120) Net income $1,056 1,680 Common dividends (570.24) (570.24) Addition to retained earnings $485.76 $1,109.76 Earnings per share $52.8 $84 Dividends per share $28.512 $28.512 Number of common shares (millions) 20.0 20.0   Which of the following are assumptions made by the initial income statement forecast? Check all that apply.   1.The forecasted increase in net sales is 50%.   2.Black Sheep Broadcasting Company will be issuing additional debt in the coming year.   3.Black Sheep Broadcasting Company will be issuing additional shares of common stock in the coming year.   4.Spontaneously generated funds will sufficiently cover any financing needs.   5.No excess capacity currently exists.   6.The cost of sales percentage for Black Sheep Broadcasting Company will decrease due to economies of scale.     If Black Sheep Broadcasting Company had neither a sufficient amount of excess capacity to handle forecasted increases in operations nor the level of retained earnings required to increase asset levels up to the necessary level for production, this difference would be referred to as (        )and could be acquired in which of the following forms?   I. Issuing additional common stock II. Borrowing from a bank using notes payable III. Issuing long-term bonds   1. Just III   2. Just II   3. I only   4 .II and III   5. I and II   I, II, and III

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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You are the most creative analyst for Black Sheep Broadcasting Company, and your admirers want to see you work your analytical magic once more.
 
2016 Actual Results
2017 Initial Forecast
Net sales $16,000 $24,000
Cost of goods sold (12,800) (19,200)
Gross profit $3,200 $4,800
Fixed operating costs except depreciation (800) (1,200)
Depreciation (320) (480)
Earnings before interest and taxes $2,080 $3,120
Interest (320) (320)
Earnings before taxes $1,760 $2,800
Taxes (704) (1,120)
Net income $1,056 1,680
Common dividends (570.24) (570.24)
Addition to retained earnings $485.76 $1,109.76
Earnings per share $52.8 $84
Dividends per share $28.512 $28.512
Number of common shares (millions) 20.0 20.0
 
Which of the following are assumptions made by the initial income statement forecast? Check all that apply.
 
1.The forecasted increase in net sales is 50%.
 
2.Black Sheep Broadcasting Company will be issuing additional debt in the coming year.
 
3.Black Sheep Broadcasting Company will be issuing additional shares of common stock in the coming year.
 
4.Spontaneously generated funds will sufficiently cover any financing needs.
 
5.No excess capacity currently exists.
 
6.The cost of sales percentage for Black Sheep Broadcasting Company will decrease due to economies of scale.
 
 
If Black Sheep Broadcasting Company had neither a sufficient amount of excess capacity to handle forecasted increases in operations nor the level of retained earnings required to increase asset levels up to the necessary level for production, this difference would be referred to as (        )and could be acquired in which of the following forms?
 
I. Issuing additional common stock
II. Borrowing from a bank using notes payable
III. Issuing long-term bonds
 
1. Just III
 
2. Just II
 
3. I only
 
4 .II and III
 
5. I and II
 
I, II, and III
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