Use the Following Information and the Percent-Of-Sales Method to Answer

question 13

Multiple Choice

Use the following information and the percent-of-sales method to answer the following question(s) .
Below is the 2014 year-end balance sheet for Banner,Inc.Sales for 2014 were $1,600,000 and are expected to be $2,000,000 during 2015.In addition,we know that Banner plans to pay $90,000 in 2015 dividends and expects projected net income of 4% of sales.(For consistency with the Answer selections provided,round your forecast percentages to two decimals. )
Banner,Inc.Balance Sheet
December 31,2014
Assets
Current assets $890,000
Net fixed assets 1,000,000
Total $1,890,000
Liabilities and Owners' Equity
Accounts payable $160,000
Accrued expenses 100,000
Notes payable 700,000
Long-term debt 300,000
Total liabilities 1,260,000
Common stock (plus paid-in capital) 360,000
Retained earnings 270,000
Common equity 630,000
Total 1,890,000
-Banner's projected discretionary financing needed for 2015 is

• A)$420,000.
• B)$440,000.
• C)$360,000.
• D)$370,000.

---

Definitions:

Present Discounted Value

The value of a future amount of money in today's terms, calculated by applying a discount rate to account for time and risk.

Payments For Capital

Funds disbursed to acquire or maintain fixed assets, like equipment or buildings, or to compensate the providers of financial capital.

Interest

The charge for borrowing money, typically expressed as an annual percentage of the principal.

Credit

The trust which allows one party to provide resources to another party wherein the second party does not reimburse the first party immediately but promises to do so in the future.