Smiley Corporation's current sales and partial balance sheet are shown below

Management Dec 11, 2020

Smiley Corporation's current sales and partial balance sheet are shown below.

This yearSales $10,000 Balance Sheet: LiabilitiesAccounts payable$2,000Notes payable$1,500Accruals$2,000 Total current liabilities$5,500Long-term bonds$2,000 Total liabilities$7,500Common stock$2,000Retained earnings$3,000 Total common equity$5,000 Total liabilities & equity$12,500Sales are expected to grow by 12% next year. Assuming no change in operations from this year to next year, what are the projected spontaneous liabilities? Do not round intermediate calculations. Round your answer to the nearest dollar.

Expert Solution

Computation of Projected Spontaneous Liabilities:

Spontaneous Liabilities = Accounts Payable + Accruals

= $2000 + $2000

= $4000

Increase of 12% in spontaneous liabilities.

Projected Spontaneous Liabilities = $4000 + $4,000 * 12%

= $4000 + $480

= $4,480

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