Sub: Accounts Topic: Accounting for Corporations
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
Balance sheet as of December 31, 2005
Cash 200,000 Accounts Payable 600,000
Accounts receivable 400,000 Notes Payable 500,000
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