The "Percent of Sales Method" Is a Method of Preparing

question 101

Multiple Choice

The "percent of sales method" is a method of preparing pro forma financial statements.All of the following would be examples of how the "percent of sales method" is developed EXCEPT:

• A) Forecast expenses by applying a percent of projected sales, using last year's expenses as a percent of last year's sales.
• B) Forecast assets by applying a percent of projected sales, using current year's assets as a percent of current year's sales.
• C) Approximate liabilities by applying a percent of projected sales, using the last five-year average of liabilities as a percent of sales.
• D) Forecast retained earnings by applying a percent of projected sales, using current year's retained earnings as a percent of current year's sales.

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