Smith Smyth, Inc., has the following capital structure:

Current liabilities $ 20,000,000 Long-term debt 30,000,000 Preferred stock ($10 par value) 40,000,000 Common stock ($1 par value) 40,000,000 Capital in excess of par 20,000,000 Retained earnings 15,000,000 Total liabilities and shareholders’ equity $165,000,000 Required

a. Determine the impact on Smyth’s capital structure if it issues an additional long-term debt of $20,000,000. In other words, show what Smyth’s capital structure will be with the new debt.

b. Determine the impact on Smyth’s capital structure if it converts half the long-term debt, including that issued in part

a, to common stock at a conversion price of $10.

c. Determine the impact on Smyth’s capital structure if it converts all its preferred stock to common stock. The conversion ratio is 2.5 shares of common stock for each share of preferred stock.

d. Determine the impact on Smyth’s capital structure if it purchases 5,000,000 shares for its common stock at a market price of $12 per share.

e. Determine the impact on Smyth’s capital structure if it suffers losses of $10,000,000 in the next fiscal year.

f. Reconstruct the right side of the balance sheet, reflecting all the above changes, as if they occurred simultaneously. (Hint: Set up an accounting equation and record all the transactions.)