A Firm Has the Following Account Balances for This Year

question 59

Multiple Choice

A firm has the following account balances for this year. Sales for the year are $500,000. Projected sales for next year are $545,000. The percentage of sales approach is used for pro forma purposes. All balance sheet accounts, except long-term debt and common stock, change according to that approach. The firm plans to decrease the long-term debt balance by $5,000 next year. Retained earnings is expected to increase by $3,500 next year. What is the projected external financing need?
$\begin{array}{lrr} \text {Current assets } &\$48,000\\ \text { Net fixed assets } &\$158,000\\ \text { Current liabilities } &\$48,000\\ \text { Long-term debt } &\$83,000\\ \text { common stock} &\$36,000\\ \text { Retained earnings } &\$40,000\\\end{array}$

• A)$10,520
• B)$14,720
• C)$18,520
• D)$20,720
• E)$25,620

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