In Problem 19, suppose Lambert Limo Corp. paid out $25,000 in cash dividends. Is this possible? If no new investments were made in net fixed assets or net working capital, and if no new stock was issued during the year, what do you know about the firm’s long-term debt account?

Data from Problem 19

During 2002, Lambert Limo Corp. had sales of $900,000. Cost of goods sold, administrative and selling expenses, and depreciation expenses were $600,000, $170,000, and $105,000, respectively. In addition, the company had an interest expense of $85,000 and a tax rate of 35 percent. (Ignore any tax loss carry-back or carry-forward provisions.)