As applied to the pro forma balance sheet, which of the statements bel

As applied to the pro forma balance sheet, which of the statements below is FALSE?

A) The company looks at the prior year’s balance sheet and finds each line’s percentage of total assets.
B) The company forecasts the coming year’s total assets based on expected changes such as the completion of capital projects, desired levels of certain accounts such as cash and inventories, and additional borrowing for dividend purposes.
C) If a large capital project will be completed in the coming year and the Plant, Property and Equipment line will grow significantly, its percentage of total assets should increase.
D) Financing a capital project may require additional debt financing, causing the percentage of long-term debt to rise above its prior year’s percentage of total assets.

ANSWER

Answer: B
Explanation: B) A company forecasts the coming year’s total assets based on KNOWN changes such as the completion of capital projects, desired levels of certain accounts such as cash and inventories, and additional borrowing for CAPITAL PROJECTS.