Answer:
Option B. -$22,000
Step-by-step explanation:
Last year data :
Sales = $200,000
Profit margin = 20%
Total assets = $120,000
Accounts payable = $50,000
Accruals = $20,000
Sales growth rate = 40%
Calculate total increase in total assets :
Increase in total assets = Total assets × Growth rate
= 120,000 × 40%
= $48,000
Calculate increase in spontaneous liabilities :
Increase in spontaneous liabilities = (50,000 + 20,000) × 40%
= $28,000
Calculate increase in retained dividend :
calculate the increase sales :
increased sales = 200,000 × (1 + 0.40)
= 280,000
calculate profit margin for next year on increase sales :
Profit margin on increased sales = 280,000 × 20%
= $56,000
Calculate retained earning :
Retained earning = profit - payout of profit
= 56,000 - ( 56,000 × 25% )
= 56,000 - 14,000
= $42,000
Calculate AFN :
AFN = Increase in assets - Increase in liabilities - increase in retained earning
= 48,000 - 28,000 - 42,000
= -$22,000
Option B. is the answer.
