Continuation of PI 0-31 A: revised sales (Learning Objective 4)

Refer to P10-31A. Before granting a loan to Alliance Printing, Bank of America asks for a sensitivity analysis assuming that April sales are only $60,000 rather than the $90,000 originally budgeted. (While the cost of goods sold will change, assume that purchases, depreciation, and the other operating expenses will remain the same as in P10-31A.)

Requirements 1. Prepare a revised budgeted balance sheet for Alliance Printing, showing separate computations for cash, inventory, and owners’ equity balances.
2. Suppose Alliance Printing has a minimum desired cash balance of $23,000. Will the company need to borrow cash in April?
3. In this sensitivity analysis, sales declined by 3314% ($30,000 $90,000). Is the decline in expenses and income more or less than 3314% ? Explain.