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Question
Use the following information and the percent-of-sales method to answer the following question(s).Below is the 2004 year-end balance sheet for Banner, Inc. Sales for 2004 were $1,600,000 and are expected to be $2,000,000 during 2005. In addition, we know that Banner plans to pay $90,000 in 2005 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 | |
| 31-Dec-04 | |
| 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 accrued expenses for 2005 are:
A) $120,000.
B) $160,000.
C) $100,000.
D) $200,000.
Answer
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