Study the income statement and balance sheet shown on below and answer the following questions.

Supposing that the 2022 sales are projected to increase by 25% over the year 2021 sales and that there is proportional relationship between sales to operating costs, interest expenses, current assets and spontaneous liabilities. The company has been operating at full capacity and planned to maintain the dividend ratio and profit margin position of the previous year. Required i. Using the Percentage of Sales method, compute the additional funds needed (AFN), assuming that the company was operating at full capacity in the year 2021. (8 Marks)

ii. Using the Formula method, compute the additional funds needed, assuming that the company was operating at full capacity in the year 2021. (4 Marks)

Table 1: Balance Sheet for 2021 Account Noncurrent assets Inventory Accounts Receivables Bank Total Assets Amount (K) 140,000 30,000 28,000 5,000 203,000 Accounts payables Notes payables 8% Loan Ordinary share capital Retained profits Total liabilities and Equity 12,000 15,000 50,000 100,000 26,000 203,000 Table 2: Income statement for 2021 Account Sales Less cost of sales Gross Profit Less: Administration expenses Amount (K) 280,000 (210,000) 70,000 46,000 Net Profit (Earnings before tax) Less: Interest on loan 24,000 4,000 Earnings before tax Less tax (30%) Net income Less: Dividend Retained earnings 20,000 6,000 14,000 5,000 9,000 ADA Table 1: Balance Sheet for 2021 Account Noncurrent assets Inventory Accounts Receivables Bank Total Assets Amount (K) 140,000 30,000 28,000 5,000 203,000 Accounts payables Notes payables 8% Loan Ordinary share capital Retained profits Total liabilities and Equity 12,000 15,000 50,000 100,000 26,000 203,000 Table 2: Income statement for 2021 Account Sales Less cost of sales Gross Profit Less: Administration expenses Amount (K) 280,000 (210,000) 70,000 46,000 Net Profit (Earnings before tax) Less: Interest on loan 24,000 4,000 Earnings before tax Less tax (30%) Net income Less: Dividend Retained earnings 20,000 6,000 14,000 5,000 9,000 ADA