Use the percent of sales method of preparing pro forma fi nancial statements to determine the projection for next years inventory. Make the following assumptions: current years sales are $24,500,000; current years cost of goods sold is $15,925,000; sales are expected to rise by 25%. The fi rms investment in inventory in the current year is $3,621,300. What is the projection for next years inventory?

a. $5,555,000 b. $6,125,000 c. $4,526,600 d. $3,981,250

Buster Enterprises projected sales for the fi rst six months of 2008 are given below:

Jan. $400,000 April $450,000 Feb. $540,000 May $480,000

Mar. $350,000 June $520,000

30% of sales are collected in cash at time of sale, 60% are collected in the month following the sale, and the remaining 10% are collected in the second month following the sale. Cost of goods sold is 70% of sales. Purchases are made in the month prior to the sales, and payments for purchases are made in the month of the sale. Total other cash expenses are $50,000/month. The companys cash balance as of February 28, 2008 will be $30,000. Excess cash will be used to retire short-term borrowing (if any). Buster Enterprises has no short term borrowing as of February 28, 2008. Assume that the interest rate on short-term borrowing is 1% per month. The company must have a minimum cash balance of $20,000 at the beginning of each month. What is Buster Enterprises earnings before interest and taxes for April 2008?

a. $ 85,000 b. $159,000 c. $138,000 d. $135,000

Fielding Wilderness Outfi tters had projected its sales for the fi rst six months of 2008 to be as follows:

Jan. $ 50,000 April $180,000 Feb. $ 60,000 May $240,000 Mar. $100,000 June $240,000

Cost of goods sold is 60% of sales. Purchases are made and paid for two months prior to the sale. 40% of sales are collected in the month of the sale, 40% are collected in the month following the sale, and the remaining 20% in the second month following the sale. Total other cash expenses are $40,000/month. The companys cash balance as of March 1st, 2008 is projected to be $40,000, and the company wants to maintain a minimum cash balance of $15,000. Excess cash will be used to retire short-term borrowing (if any exists). Fielding has no short-term borrowing as of March 1st, 2008. Assume that the interest rate on short-term borrowing is 1% per month. What is Fieldings projected total receipts (collections) for April?

a. $36,000 b. $124,000 c. -$4,000 d. $180,000