he Longbranch Western Wear Company has the following financial statements, which are representative of the company$$s historical average.

Income Statement

Sales $ $200,000$

Expenses $151,100$

Earnings before interest and taxes $ $48,900$

Interest $2,900$

Earnings before taxes $ $46,000$

Taxes $18,000$

Earnings after taxes $ $28,000$

Dividends $ $12,600$

Balance Sheet

Assets Liabilities and Shareholders' Equity

Cash $$3,000$ Accounts payable $$4,900$

Accounts receivable $19,000$ Accrued wages $2,100$

Inventory $24,000$ Accrued taxes $9,000$

Current assets $$46,000$ Current liabilities $$16,000$

Capital assets $79,000$ Notes payable $7,900$

Long$-$term debt $19,500$

Common stock $29,000$

Retained earnings $52,600$

Total assets $$125,000$ Total liabilities and equity $$125,000$

Longbranch is expecting a $20$ percent increase in sales next year, and management is concerned about the company$$s need for external funds. The increase in sales is expected to be carried out without any expansion of capital assets; instead, it will be done through more efficient asset utilization in the existing stores. Of liabilities, only current liabilities vary directly with sales.

a$.$ Using a percent$-$of$-$sales method, determine whether Longbranch Western Wear has external financing needs. $($Input the amount as a positive value.$)$

The firm

has

$

$12480$

in

surplus funds

$.$

b$.$ Prepare a pro forma balance sheet with any financing adjustment made to notes payable and excess, if any, shall reduce long term debt. $($Input all answers as positive values. Be sure to list the assets and liabilities in order of their liquidity. Do not leave any empty spaces; input a $0$ wherever it is required.$)$

Balance Sheet

Current assets Liabilities

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$

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$

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$($Click to select$)$

Current assets $

Current liabilities $

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$($Click to select$)$

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$

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Total assets $

Total liabilities and equity $

c$.$ Calculate the current ratio and total debt to assets ratio for each year. $($Round the final answers to $2$ decimal places.$)$

Year $1$ Year $2$

Current ratio

X

X

Total debt$/$ assets

$\%$

$\%$

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