ECG Monitors is forecasting that sales next year will be $8,640,000, a 20 percent increase over current sales. ECG has total assets of $3,840,000 and all assets will increase proportionately with sales. Of the current liabilities, only accounts payable (now $740,000) will increase with sales. What total financing will be needed by ECG to support the expected sales increase?
A) $317,600
B) $620,000
C) $465,600
D) $840,400

Question

Quizplus · Accepted Answer

The sales increase is $1,440,000 (20% of $7,200,000). The asset increase is $640,000 (20% of $3,840,000). The increase in accounts payable is $148,000 (20% of $740,000). The total financing needed is $640,000 - $148,000 = $492,000.

ECG Monitors Is Forecasting That Sales Next Year Will Be