Question

The CFO of Twine Enterprises expects sales to increase from​ $8,000,000 in 2010 to​ $12,000,000 in 2011. Current assets in 2010 are equal to​ $5,000,000. Using the percent of sales​ method, projected current assets for 2011 are equal to A. ​$7,500,000. B. ​$7,083,333. C. ​$5,500,000. D. ​$9,000,000.

Answer 1

Answer:

$7,500,000

Explanation:

For computing the projected current assets, first we have to determine the percentage of sales which is shown below:

= (2011 sales - 2010 sales) ÷ (2010 sales)

= ($12,000,000 - $8,000,000) ÷ ($8,000,000)

= 50%

Now the current assets would be

= Current assets + current assets × percent of sales​

= $5,000,000 + $5,000,000 × 50%

= $5,000,000 + $2,500,000

= $7,500,000