Question

1023 Use the following information and the percent-of-sales method to answer the following question(s). Below is the 2017 year-end balance sheet for Smith, Inc. Sales for 2017 were $1,600,000 and are expected to be $2,000,000 during 2018. In addition, we know that Smith plans to pay $90,000 in 2018 dividends and expects projected net income of 4% of sales. (For consistency with the Answer selections provided, round your forecast percentages to two decimals.)

Answer 1

1.
Smith's projected current assets for 2018:

Percentange of current assets to sales = ($890,000 / $1,600,000) * 100
= 55.625%

current assets for 2018 = $2,000,000 * 55.625% = $1,112,500.

2.
Smith's projected fixed assets for 2018:

Percentage of fixed assets to sales = ($1,000,000 / $1,600,000) * 100 = 62.5%

Fixed assets for 2018 = $2,000,000 * 62.5% = $1,250,000.

3.
Smith's projected accounts payable balance for 2018:

Percentage of accounts payable to sales = ($160,000 / $1,600,000) * 100 = 10%

Accounts payable for 2018 = $2,000,000 * 10% = $200,000

4.
Smith's projected accrued expenses for 2018:

Percentage of accrued expenses to sales = ($100,000 / $1,600,000) * 100 = 6.25%

Accrued expenses for 2018 = $2,000,000 * 6.25% = $125,000.

FEEL FREE TO ASK DOUBTS.

NOTE: As per HOMEWORKLIB RULES, only first four sub part questions can be answered. Post the rest of the questions separately. Thank you..