Apple Two Enterprises expects to generate sales of $5,950,000 for fiscal 2018; sales were $3,450,000 in fiscal 2017. Assume the following figures for the fiscal year ending 2017: cash $70,000; accounts receivable $250,000; inventory $400,000; net fixed assets $520,000; accounts payable $235,000; and accruals $155,000. Use the percent-of-sales method to forecast cash for the fiscal year ending 2018.
A) $120,725
B) $75,003
C) $216,418
D) $319,604

Question

Quizplus · Accepted Answer

The percent-of-sales method assumes that balance sheet items vary directly with sales. The sales increase from $3,450,000 to $5,950,000, which is a 72.46% increase. Applying this percentage increase to the cash balance of $70,000 from 2017 gives a forecasted cash balance of $120,725 for 2018.

Apple Two Enterprises Expects to Generate Sales of $5,950,000 for Fiscal