Ask Question
26 July, 01:21

Use the "percent of sales method" of preparing pro forma financial statements to determine the projection for next year's accounts payable. Make the following assumptions: current year's sales are $27,800,000; current year's cost of goods sold is $17,528,000; sales are expected to rise by 30%. The firm's investment in accounts payable in the current year is $2,218,500. What is the projection for next year's accounts payable? A. $3,781,750 B. $4,184,000 C. $2,127,000 D. $2,884,050

+5
Answers (1)
  1. 26 July, 03:02
    0
    option (D) $2,884,050

    Explanation:

    Data provided in the question:

    current year's sales = $27,800,000

    Current year's cost of goods sold = $17,528,000

    Sales for the next year = current year's sales + 30% current year's sales

    = $27,800,000 + 0.30 * $27,800,000

    = $36,140,000

    Accounts payable in the current year = $2,218,500

    Now,

    Percentage of Account payable to sales for the current year

    = [Accounts payable in the current year : current year's sales] * 100%

    = [ $2,218,500 : $27,800,000 ] * 100%

    = 7.98%

    This will be same for the next year

    therefore,

    Percentage of Account payable to sales for the next year

    = [Accounts payable in the next year : next year's sales] * 100%

    or

    7.98% = [ Accounts payable in the next year : $36,140,000 ] * 100%

    or

    Accounts payable in the next year = 0.0798 * $36,140,000

    = 2,884,050

    Hence,

    The correct answer is option (D) $2,884,050
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Use the "percent of sales method" of preparing pro forma financial statements to determine the projection for next year's accounts payable. ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers