The 1999 Balance Sheet for ABC Corporation is shown below: Assets 1999 Liabiliti
ID: 2703223 • Letter: T
Question
The 1999 Balance Sheet for ABC Corporation is shown below:
Assets 1999 Liabilities 1999
Cash $10,000 Accounts Payable $ 8,000
Accounts Receivable 20,000 Accruals 2,000
Inventory 40,000 Total Current Liabilities $10,000
Total Current Assets $70,000 Bonds $30,000
Net Fixed Assets $150,000
Total Liabilities $40,000
Owners Equity
Common Stock $100,000
Retained Earnings 80,000
Total Assets $220,000 Total Liab.& OE $220,000
The firm is currently operating at 100% capacity with sales of $100,000. Management believes that next year sales will increase by 10% and it is anticipating that the firm
Explanation / Answer
AFN = (A*/S0)?S - (L*/S0)?S - M*S1(RR)
where A* = Assets tied directly to sales=220,000
L* = Liabilities that increase spontaneously (AP and accruals
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