Use the following information and the percent-of-sales method to answer the following question(s).
Below is the 2014 year-end balance sheet for Banner,Inc.Sales for 2014 were $1,600,000 and are expected to be $2,000,000 during 2015.In addition,we know that Banner plans to pay $90,000 in 2015 dividends and expects projected net income of 4% of sales.(For consistency with the Answer selections provided,round your forecast percentages to two decimals. )
Banner,Inc.Balance Sheet
December 31,2014
Assets
Current assets $890,000
Net fixed assets 1,000,000
Total $1,890,000
Liabilities and Owners' Equity
Accounts payable $160,000
Accrued expenses 100,000
Notes payable 700,000
Long-term debt 300,000
Total liabilities 1,260,000
Common stock (plus paid-in capital)360,000
Retained earnings 270,000
Common equity 630,000
Total 1,890,000
-Banner's projected long-term debt for 2015 is
A)$700,000.
B)$880,000.
C)$380,000.
D)$300,000.

Question

Quizplus · Accepted Answer

The long-term debt is not directly affected by the percent-of-sales method, which typically impacts current assets and liabilities. Therefore, the projected long-term debt remains the same as the previous year, $300,000.

Use the Following Information and the Percent-Of-Sales Method to Answer