Use the percentage of sales forecasting method to compute the additional financing needed by Lambrechts Specialty Shops, Inc. (LSS), if sales are expected to increase from a current level of $20 million to a new level of $25 million over the coming year. LSS expects earnings after taxes to equal $1 million over the next year. LSS intends to pay a $300,000 dividend next year. The current year balance sheet for LSS is as follows: Lambrechts Specialty Shops, Inc. Balance Sheet as of December 31, 20X3 Cash $1,000,000 Accounts payable $3,000,000 Accounts receivable 1,500,000 Notes payable 3,000,000 inventories 6,000,000 Long-term debt 2,000,000 Net fixed assets 3,000,000 Stockholders’ equity 3,500,000 Total Assets $11,500,000 Total liabilities and equity $11,500,000 All assets, except “cash”, are expected to vary proportionately with sales. Of total liabilities and equity, only “accounts payable” is expected to vary proportionately with sales.
- Use the percentage of sales
forecasting method to compute the additional financing
needed by Lambrechts Specialty Shops, Inc. (LSS), if sales are expected to
increase from a current level of $20 million to a new level of $25 million over the
coming year. LSS expects earnings after taxes to equal $1 million over the next
year. LSS intends to pay a $300,000 dividend next year. The current year balance
sheet for LSS is as follows:
Lambrechts Specialty Shops, Inc.
Balance Sheet as of December 31, 20X3
Cash $1,000,000 Accounts payable $3,000,000
Accounts receivable 1,500,000 Notes payable 3,000,000
inventories 6,000,000 Long-term debt 2,000,000
Net fixed assets 3,000,000
Total Assets $11,500,000 Total liabilities and equity $11,500,000
All assets, except “cash”, are expected to vary proportionately with sales. Of total liabilities and equity, only “accounts payable” is expected to vary proportionately with sales.
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 3 images
