Financing Deficit

Stevens Textile Corporation's $2019$ financial statements are shown below:

Balance Sheet $asof$ December $31,2019(Thousandsof$ Dollars$)$

Income Statement for December $31,2019(Thousandsof$ Dollars$)$

Sales

Interest

Pre$-$tax earnings

Taxes $(25\%)$

Net income

Dividends $(40\%)$

Addition $to$ retained earnings

$$828$ Stevens grew rapidly $in2019$ and financed the growth with notes payable and long$-$term bonds. Stevens expects sales $to$ grow $by25\%in$ the next year but will finance the growth with a line $of$ credit, not notes payable $or$ long$-$term bonds. Use the forecasted financial statement method $to$ forecast a balance sheet and income statement for December $31,2020.$ The interest rate $on$ all debt $is10\%,$ and cash earns $no$ interest income. The line $of$ credit $is$ added $at$ the end $of$ the year, which means that you should base the forecasted interest expense $on$ the balance $of$ debt $at$ the beginning $of$ the year. Use the forecasted income statement $to$ determine the addition $to$ retained earnings. Assume that the company was operating $at$ full capacity $in2019,$ that $it$ cannot sell off any $of$ its fixed assets, and that assets, spontaneous liabilities, and operating costs are expected $to$ increase $by$ the same percentage $as$ sales. Determine the required line $of$ credit. $Do$ not round intermediate calculations. Round your answers $to$ the nearest dollar.