Table 4.5 a Financial Manager at General Talc Mines Has Gathered the Gathered

question 155

Multiple Choice

Table 4.5
A financial manager at General Talc Mines has gathered the financial data essential to prepare a pro forma balance sheet for cash and profit planning purposes for the coming year ended December 31, 2015. Using the percent-of-sales method and the following financial data, prepare the pro forma balance sheet in order to answer the following multiple choice questions.
(a) The firm estimates sales of $1,000,000.
(b) The firm maintains a cash balance of $25,000.
(c) Accounts receivable represents 15 percent of sales.
(d) Inventory represents 35 percent of sales.
(e) A new piece of mining equipment costing $150,000 will be purchased in 2010.
Total depreciation for 2010 will be $75,000.
(f) Accounts payable represents 10 percent of sales.
(g) There will be no change in notes payable, accruals, and common stock.
(h) The firm plans to retire a long term note of $100,000.
(i) Dividends of $45,000 will be paid in 2015.
(j) The firm predicts a 4 percent net profit margin.
Balance Sheet
General Talc Mines
December 31, 2014
-The pro forma current liabilities amount is ________. (See Table 4.5)

• A) $400,000
• B) $450,000
• C) $475,000
• D) $500,000

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Definitions:

Good Faith

Acting with honest intention or belief without intending to deceive.

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Issuance Price

The price at which a company's securities are offered to the public for sale for the first time.

Market Rate

The prevailing price or interest rate at which goods, services, or securities are bought and sold in a competitive marketplace.