Question

The 2016 balance sheets and the 2017 forecasted (pro-farma) balance sheet for McMurphy and Associates , Inc. appears below. All figures are in millions of U.S. dollar. The firm plans to pay common dividends of $100 million in 2017.

Which of the following actions would NOT contribute to the balancing of the 2017 forecasted balance sheet?

Assets	2016	Input	Basis for 2017 Forecast	2017
Cash	$20	1%	×   2017 Sales	$22
Accts. rec.	$280	14%	×   2017 Sales	$308
Inventories	$400	20%	×   2017 Sales	$440
Total CA	$700			$770
Net fixed assets	$500	25%	×   2017 Sales	$550
Total assets	$1,200			$1,320
Liabilities and equity
Accts. pay. & accruals	$80	4%	×   2017 Sales	$88
Line of credit	$0		Add LOC if fin. deficit
Total CL	$80			$88
Long-term debt	$500		No Change	$500
Total liabilities	$580			$588
Common stock	$420		No Change	$420
Retained earnings	$200		Old RE + Add. to RE	$253
Total common equity	$620			$673
Total liabs. & equity	$1,200			$1,261
			Check: TA ? TL & Equ.	$59

Issuing new 10 year bonds

Reducing the firms minimum cash balance

Reducing inventories

Reducing accounts payable

Answer 1

While forcasting the balance sheet of 2017. Reducing the firms minimum cash balance will not contribute to the balancing the forcasted balance sheet of 2017:

Explanation:
1). Reducing the firms minimum cash balance will not contribute to the balancing the forcasted balance sheet of 2017 because it is setting of standard for maintaining the cash balance as per the specified limit. It will not change the balance of cash and assets section because there is no inflow or outflow of cash. Hence reducing the firms minimum cash balance will not impact the balancing of forcasted 2017 balance sheet.
Issuing

2). Issuing 10 year bond will impact the balance sheet because there is inflow of cash received by issuing bonds which will increase cash balance and total assets value while on the liabilities side it will increase the long term liability by the same corresponding amount on the balance sheet.

3). Reducing Inventories will impact balance sheet because there will be less amount in the inventories account and more cash balance available in the balance sheet. There will be no difference in the total assets section if it is cash related but if it is on account than it will impact both total assets and liabilities section.

4). Reducing accounts payable will also impact balance sheet forecasted because it will decrease the cash balance in the balance sheet and simuntaneously reduce the liability section by decreasing the balance of accounts payable.

(I'm unable to understand why there is difference the both sides of balance sheet of 2017.)