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

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

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