The pictures is the formula and example.Compute the additional funds needed.JHOPE "I am your hope" Company has 10%net profit margin on sales in previous yearsand expects to maintain thesame next year. The Business is expected toincrease its sales level from P1,000,000 to P1255 000.The percentages of current sales and currentliabilities that have direct relationship withsales are 60% and 35%,respectively. Out of the total earnings at areexpected to be realized next year, 25% will beretumed to the shareholdersin the form of dividends.Compute the following:5. Projected increase in current assets6. Spontaneous increase in current liabilities7. Increase in retained earings8. Additional fund needed. Spontaneouscurrent liabilitiesincrease inChange in sales(present)current liabilitiesSales (present)980,0007,000,000(10% x 7,000,000)14%%700,00098,000The next procedure is to determine the expected eamings after tax by preparing a projected statement of comprehensiveincome.7,700,000.004,620,000.003,080,000.001,925,000.001,155,000.00245,000.00910,000.00273,000.00637,000.00Sales (P7,000,000 x'1.10)Less: Cost of sales (P7,700,000 x 60%)Gross ProfitLess: Operating expense (P7,700,000 x 25%)Income before interest and taxesLess: Interest expense.Inome before taxesLess: Income tax (P910,000 x 30%)Net income after taxThe amount f dividends to be distributed to the shareholders is P382,200 computed as follows:Dividends (637,.000 x 60%) = 382,200The increase in retained earnigs amounts to P254,800 (637,000 - 382,200).Based on the above computations, the mount of additional funds needed is computed as follows.projectedincrease inSpontaneousincrease inIncrease inAdditionalfund neededretianedcurrentassetseamingsliabilities420,000.00 -98,000,00-254,800.0067,200.00 ng anAdditionalfundneededSpontaneousincrease incurrentliabilitiesIncrease inretainedeamingsprojectedincrease in%3Dassetsprojectedincrease inassetscurrent assets(present)Change insales%3DSales (present)Spontaneousincrease in currentChange insalescurrent liabilities(present)liabilitiesSales (present)Increase inEarningsafter taxDividend payment,retainedearningsILLUSTRATION:Yvonne Manufacturing company presents the ff. information related to 2018 result of operation:SalesCurrent AssetsNon current assetscurrent-liabilitiesnon current liabilitiesordinary sharesretained eamings7,000,0004,200,0002,800,000980,000770,0004,200,000| 1,050,00The cost of sales is 60% of sales and the operation expense is 25% of sales. The interest expense amount to 240,000.The applicable tax rate is 30%. The company expects to maintain this relationship in the 2019 operation and plans topay 60% of the income as dividends to shareholders.Because of higher demands of the product and increased share in market, the business expects a 10% increase in salesin 2019. Non current assets in 2019 are not expected to increase including non-current liabilities spontaneous to theincrease in sales)REQUIRED:1. Determine whether additional funds are needed because of the expected increase in sales.2. Prepare the projected statement of financial positionnputed by determining first the projected increase in salesAnswer 1. The amount of additional funds if requiredsuch as the following:current assetsprojectedincrease inChange in sales(present)assetsSales (present)(10% x 7,000,000)4,200,0007,000,00060%= 700,000420,000

Question

The pictures is the formula and example.Compute the additional funds needed.JHOPE &#34;I am your hope&#34; Company has 10%net profit margin on sales in previous yearsand expects to maintain thesame next year. The Business is expected toincrease its sales level from P1,000,000 to P1255 000.The percentages of current sales and currentliabilities that have direct relationship withsales are 60% and 35%,respectively. Out of the total earnings at areexpected to be realized next year, 25% will beretumed to the shareholdersin the form of dividends.Compute the following:5. Projected increase in current assets6. Spontaneous increase in current liabilities7. Increase in retained earings8. Additional fund needed. Spontaneouscurrent liabilitiesincrease inChange in sales(present)current liabilitiesSales (present)980,0007,000,000(10% x 7,000,000)14%%700,00098,000The next procedure is to determine the expected eamings after tax by preparing a projected statement of comprehensiveincome.7,700,000.004,620,000.003,080,000.001,925,000.001,155,000.00245,000.00910,000.00273,000.00637,000.00Sales (P7,000,000 x'1.10)Less: Cost of sales (P7,700,000 x 60%)Gross ProfitLess: Operating expense (P7,700,000 x 25%)Income before interest and taxesLess: Interest expense.Inome before taxesLess: Income tax (P910,000 x 30%)Net income after taxThe amount f dividends to be distributed to the shareholders is P382,200 computed as follows:Dividends (637,.000 x 60%) = 382,200The increase in retained earnigs amounts to P254,800 (637,000 - 382,200).Based on the above computations, the mount of additional funds needed is computed as follows.projectedincrease inSpontaneousincrease inIncrease inAdditionalfund neededretianedcurrentassetseamingsliabilities420,000.00 -98,000,00-254,800.0067,200.00 ng anAdditionalfundneededSpontaneousincrease incurrentliabilitiesIncrease inretainedeamingsprojectedincrease in%3Dassetsprojectedincrease inassetscurrent assets(present)Change insales%3DSales (present)Spontaneousincrease in currentChange insalescurrent liabilities(present)liabilitiesSales (present)Increase inEarningsafter taxDividend payment,retainedearningsILLUSTRATION:Yvonne Manufacturing company presents the ff. information related to 2018 result of operation:SalesCurrent AssetsNon current assetscurrent-liabilitiesnon current liabilitiesordinary sharesretained eamings7,000,0004,200,0002,800,000980,000770,0004,200,000| 1,050,00The cost of sales is 60% of sales and the operation expense is 25% of sales. The interest expense amount to 240,000.The applicable tax rate is 30%. The company expects to maintain this relationship in the 2019 operation and plans topay 60% of the income as dividends to shareholders.Because of higher demands of the product and increased share in market, the business expects a 10% increase in salesin 2019. Non current assets in 2019 are not expected to increase including non-current liabilities spontaneous to theincrease in sales)REQUIRED:1. Determine whether additional funds are needed because of the expected increase in sales.2. Prepare the projected statement of financial positionnputed by determining first the projected increase in salesAnswer 1. The amount of additional funds if requiredsuch as the following:current assetsprojectedincrease inChange in sales(present)assetsSales (present)(10% x 7,000,000)4,200,0007,000,00060%= 700,000420,000

Accepted Answer

Current assets:The assets of the company are the valuable resources that are used in the company's…