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

Assignmentexercise 1 treatment of nsf checkthe bank

Assignment Exercise 1 Treatment Of NSF check The bank statement of Stone Supplies included a $300 NSF check that one of Stone's customer had written to pay for services that were provided by Stone. Required a. Show the e ...

Assignmentair france-klm af a franco-dutch company prepares

Assignment Air France-KLM (AF), a Franco-Dutch company, prepares its financial statements according to International Financial Reporting Standards. AF's financial statements and disclosure notes for the year ended Decemb ...

Review the provisions of the sarbanes-oxley act of 2002 to

Review the provisions of the Sarbanes-Oxley Act of 2002 to address the accounting scandals in the late 1990s and early 2000s (Enron, WorldCom, etc.). Identify the provisions that you believe made the most significant imp ...

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 ...

Assignmentduring your examination of the accounts

Assignment During your examination of the accounts receivable of Hope Ranch, a new client, you notice that one account is much larger than the rest, and you therefore decide to examine the evidence supporting this custom ...

Qestion 1beginning inventory24 tires 61purchase6 tires

QUESTION 1. Beginning inventory........24 tires @ $61 Purchase.........6 tires @ $76 Sale.......17 tires @ $105 Requirements 1. Compute cost of goods sold and gross profit under FIFO. 2. Compute cost of goods sold and gr ...

Government and nonprofit accountingyour portfolio project

Government and Nonprofit Accounting Your Portfolio Project will provide specific answers to the questions that follow. Apply what you have learned in this course to your answers to these questions. Scenario A Is fund acc ...

Problem 1the following information relates to billy bobs

Problem 1 "The following information relates to Billy Bob's Donuts defined benefit pension plan during the current reporting year (All the amounts are in millions): Plan Assets at the beginning of the year $350 Expected ...

1 you are the manager of a payroll system your company is

1. You are the manager of a payroll system. Your company is going to replace the legacy payroll system with a more robust, Web-based version. Suggest two approaches that would minimize downtime and interruption to the pa ...

1 what does it mean to create a culture of honesty openness

1. What does it mean to create a "Culture of Honesty, Openness, and Assistance?" Give some examples from an organization with which you have been affiliated. (250 words) 2. Review the section Preventing Fraud-A Sumary an ...

  • 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