In Constructing a Pro Forma Balance Sheet a Manager Can

question 59

Multiple Choice

In constructing a pro forma balance sheet a manager can estimate the accounts receivable because:

• A)managers typically construct a pro forma income statement prior to the balance sheet.Thus,an estimate of sales has already been made and this is critical to estimating accounts receivable.
• B)if the firm has already made an estimate of expected sales,then it can also estimate average daily sales.
• C)if the firm maintains similar credit standards it can use the current average age of accounts receivable to help estimate the anticipated average age of accounts receivable
• D)if the firm has each piece of information as stated above THEN they can estimate accounts receivable for the pro forma balance sheet..

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Definitions:

Depreciation Expense

An accounting method that allocates the cost of a tangible asset over its useful life.

Financial Statement Components

The main elements of financial statements, including the balance sheet, income statement, statement of cash flows, and statement of changes in equity.

Residual Value

The expected value of an asset at the end of its useful life, typically used in the context of leasing or depreciation.

Useful Life

The estimated period over which an asset is expected to be usable by the organization.