Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Accounting Basics Expert

Q1) BPC anticipates reaching sales level of $6 million in one year. Company expects net income in the next year to equal $400,000. Over past several years, company has been paying 50k in dividends to its stockholders. Company expects to continue this policy for at least next year. Actual balance sheet and income statement for BPC are given below:

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

a) Using percentage of sales method, compute additional financing needed over next year at the $6 million sales level. Illustrate pro forma balance sheet for company as of Dec 31, 2006; suppose a sales level of $6 million is reached. Suppose that all assets differ proportionately with sales. Accts payable is the only liability which varies proportionately with sales. suppose additional financing required is obtained in the form of notes payable.

b) Assume BPC mgmt feels average collection period on extra sales (sales over 4 million) will be 60 days, instead of the present level. By what amount will this increase in average collection period increase financing needed by company over the next year?

c) If BPC's banker needs company to maintain current ratio equal to 1.6 or greater, determine the max amount of additional financing which can be in the form of bank borrowings (notes payable)? Determine other potential sources of financing are available to the company?

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M922194

Have any Question? 


Related Questions in Accounting Basics

Discussion questions 1 and 2dq 1accounting cyclefinancial

Discussion Questions 1 and 2 DQ #1:Accounting Cycle Financial statements are a product of the accounting cycle. Think about two different companies: a manufacturing company, and a retail company. Why would different comp ...

Assignment change modelassume you are the sales and

Assignment Change Model Assume you are the Sales and Marketing Director for Sea Treasures, a small group of well-known retail stores specializing in exotic sea life and high-end accessories for aquariums. The company has ...

Taskas part of the planning process for your new accounting

TASK As part of the planning process for your new accounting information system, your manager has asked that you prepare flowcharts. This graphic presents the flow of information through the accounting cycles. • Using th ...

Accounting assignment1 the standard direct labor time for

Accounting Assignment 1. The standard direct labor time for producing one pair of original Crocs is 0.6 hours and the direct labor rate for producing one pair of original Crocs is $18.50 per hour. During February, 10,000 ...

Assignment research applicationin this assignment you will

Assignment: Research Application In this assignment, you will use the Internet and other sources to gather and interpret information related to service and manufacturing organizations. Select either a service or a manufa ...

On october 1 little bobby corporations stockholders equity

On October 1, Little Bobby Corporation's stockholders' equity is as follows. Common stock, $5 par value                                       $400,000 Paid-in capital in excess of par- common stock             25,000 Ret ...

Your city has decided to build a new library the projected

Your city has decided to build a new library. The projected cost is $2 million. A bond issue for $1.2 million has been authorized, and the remainder is supposed to come from a contribution of $800,000 from the general fu ...

Assignmentmemos are one-page 750 word minimum single-spaced

Assignment Memos are one-page (750 word minimum) single-spaced essays (no more than 10 font) and are due in the morning on Blackboard before we discuss assigned readings (a physical copy should also be brought to class). ...

Governmental accounting1 which of the following statements

GOVERNMENTAL ACCOUNTING 1. Which of the following statements is true about U.S. taxation of foreign subsidiaries? A)The U.S. does not tax income generated on subsidiaries incorporated in foreign countries. B)U.S. multina ...

Business assignmentthe comany i have choosen is upsresearch

Business Assignment The comany i have choosen is UPS. Research a company that interests you from the Fortune 500. (A list will be provided). Analyze what they do. What business are they in? What industry? How have they b ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro