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

Accountingbullwatch a mursaus video titled accounts

Accounting • Watch A. Mursau's video titled "Accounts Receivable Bad Debt Expense (Direct Write Off Method Vs Allowance Method)": https://www.youtube.com/watch?v=r3YPSwFsIps&feature=youtu.be • Based on the information in ...

Abc company enters into a lease agreement with xyz

ABC company enters into a lease agreement with XYZ corporation for laser tech machines. The lease agreement qualifies as an operating lease. However, there is one thing that stands out. There is a bargain-purchase option ...

Essay question internal accountingone to two pages single

Essay Question Internal Accounting One to two pages (single spaced, Times New Roman 12 font) discussion. Clear and well-argued showing depth of knowledge and understanding of the concepts. Check grammar and spelling. Que ...

Assignemntpart 11the type of business organization that can

Assignemnt Part 1 1. The type of business organization that can continue indefinitely is known as a: a. sole proprietorship. b. partnership. c. corporation. d. None of the above answers are correct. 2. The purpose of the ...

Question 1the following transactions occurred during july o

Question 1 The following transactions occurred during July: o Received $900 cash for services provided to a customer during July. o Received $2,200 cash investment from Barbara Hanson, the owner of the business. o Receiv ...

Learning outcomescode descriptiona1 in-depth and systematic

Learning outcomes Code Description A1 in-depth and systematic understanding of key investment concepts to facilitate strategic real estate investment decision-making A4 critical awareness and understanding of the evolvin ...

Assignmentto write discussion post min 350 words for each

Assignment To write discussion post. Min 350 words for each task. Do not use any direct quotes and/or cut and pasted information (i.e. your discussion is to be 100% your thoughts, ideals and insights). A minimum 350 word ...

Problem -firm has consulted with investment bankers and

Problem - Firm has consulted with investment bankers and determined the interest rate it would pay for different capital structures, as shown below. Data for the risk-free rate, the market risk premium, an estimate of fi ...

Assignmentpart 11 which of the following would cause a

Assignment Part 1 1. Which of the following would cause a contra-asset to be credited and an expense debited? a. Recording an accrued expense b. Recording the consumption of supplies c. Recording the building depreciatio ...

Accounting assignmentthis project requires you to select a

Accounting Assignment This project requires you to select a business and analyze part of its accounting information system. You will focus on a selected business process, develop conclusions from your observations, and a ...

  • 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