Accounting for corporations : percentage of sales method

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					              Sub: Accounts                                               Topic: Accounting for Corporations



              Question:
              Calculation of additional finance needed using percentage of sales method.

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              BPC anticipates reaching a sales level of $6 million in one year. The company expects a net
              income during the next year to equal $400,000. Over the past several years, the company has
              been paying 50k in dividends to its stockholders. The company expects to continue this policy
              for at least the next year. The actual balance sheet and income statement for BPC are as
              follows:


              BPC
              Balance sheet as of December 31, 2005
              Cash           200,000         Accounts Payable             600,000
              Accounts receivable 400,000                 Notes Payable               500,000
              Inventories             1,200,000
              Current liabilities         1,100,000
              Current assets               1,800,000         Long-term debt             200,000
              Net fixed assets             500,000         Stockholder’s equity             1,000,000
              Total assets             2,300,000           Total Liabilities and equity 2,300,000
              Using the percentage of sales method, calculate the additional financing needed over the next
				
DOCUMENT INFO
Description: Calculation of additional finance needed using percentage of sales method. : Using the percentage of sales method, calculate the additional financing needed over the next year at the $6 million sales level.
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