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

question 62

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 current assets for 2015 are

• A)$1,000,000.
• B)$1,120,000.
• C)$1,500,000.
• D)$1,260,000.

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Definitions:

Actual Interest Rate

The real rate of interest earned or paid after adjusting for compounding and fees.

Discounting

A financial strategy that adjusts the future value of cash flows to their present value, often for analysis or investment decisions.

Actual Interest Rate

The real rate of interest earned or paid on an investment or loan, taking into account the effect of compounding and all fees and charges.

Non-Interest-Bearing

Refers to financial instruments or accounts that do not yield interest over time, such as some checking accounts.