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RD, Certified Public Accountant (CPA)
Category: Tax
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Experience:  CPA, MBA, Over 10 yrs of experience in tax planning and business consulting..
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Jills Wigs Inc. had the following balance sheet last

Resolved Question:

Jill's Wigs Inc. had the following balance sheet last year:

            Cash                 $   800   Accounts payable   $   350
            Accounts receivable      450   Accrued wages          150
            Inventory               950   Notes payable        2,000
            Net fixed assets      34,000   Mortgage            26,500
                                         &nbs p; Common stock        3,200
                                         &nbs p; Retained earnings    4,000
                                         &nbs p; Total liabilities
            Total assets        $36,200    and equity        $36,200

Jill has just invented a non-slip wig for men which she expects will cause sales to double from $10,000 to $20,000, increasing net income to $1,000. She feels that she can handle the increase without adding any fixed assets. (1) Will Jill need any outside capital if she pays no dividends? (2) If so, how much?

a.     No; zero
b.     Yes; $7,700
c.     Yes; $1,700
d.     Yes; $700
Submitted: 9 years ago.
Category: Tax
Expert:  RD replied 9 years ago.

Is the question complete

Customer: replied 9 years ago.

Jill's Wigs Inc. had the following balance sheet last year:

 

Cash $ 800 Accounts payable $ 350

Accounts receivable 450 Accrued wages 150

Inventory 950 Notes payable 2,000

Net fixed assets 34,000 Mortgage 26,500

Common stock 3,200

Retained earnings 4,000

Total liabilities

Total assets $36,200 and equity $36,200

 

Jill has just invented a non-slip wig for men which she expects will cause sales to double from $10,000 to $20,000, increasing net income to $1,000. She feels that she can handle the increase without adding any fixed assets. (1) Will Jill need any outside capital if she pays no dividends? (2) If so, how much?

 

a. No; zero

b. Yes; $7,700

c. Yes; $1,700

d. Yes; $700

e. No; there will be a $700 surplus.

Expert:  RD replied 9 years ago.

d. Yes; $700

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