Balance sheet effects of leasing

Two textile companies, McDaniel-Edwards Manufacturing and Jordan-Hocking Mills, began operations with identical balance sheets. A year later both required additional manufacturing capacity at a cost of $150,000. McDaniel-Edwards obtained a 5-year, $100,000 loan at an 7% interest rate from its bank. Jordan-Hocking, on the other hand, decided to lean the required$100,000 capacity from National Leasing for 5 years; an 7% return was build into the lease. The balance sheet for each company, before the asset increase, is as follows:

		Debt	$150,000
		Equity	$100,000
Total assets	$250,000	Total liabilities and equity	$250,000

Show the balance sheet of each firm after the assets, and calculate each firm's new debt ratio. (Assume that Jordan-Hocking's lease is kept off the balance sheet.) Round your answers to the whole number.

Debt/assets ratio for McDaniel-Edwards = --------%

Debt/assets ratio for Jordan-Hocking = -------- %

Show how Jordan-Hocking's balance sheet would have looked immediately after the financing if had capitalized the lease. Round your answer to the whole number.

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