KA K Clyde's Well Servicing has the following financial statements. The balance sheet items, profit margin, and dividend payout have maintained the same relationships the past couple of years; these relationships are anticipated to hold in the future. Income Statement Sales ..... $2,000,000 Cost of goods sold 1,260,000 Gross profit.... 740,000 Selling and administrative expense. 400,000 Amortization....... 55,000 Earnings before interest and taxes 285,000 Interest 50.000 Earnings before taxes 235,000 Taxes ....... 61,000 Earnings available to common shareholders. $ 174,000 Dividends paid. $ 104,400 Balance Sheet Llabilities and Shareholders' Equity Cash $ 30,000 Accounts payable. $ 105,000 Accounts receivable. 260,000 Accruals 20,000 Inventory...... 210,000 Bank loan .... 150,000 Current assets. 500,000 Current liabilities 275,000 Capital assets. 550,000 Long-term debt. 200,000 Common stock 175,000 Retained earnings.. 400,000 Total assets. $1.050,000 Total liabilities and equity.... $1,050.000 1. Using a percent-of-sales method, determine whether Clyde's can handle a 30 percent sales increase without using external financing, assuming there is no capacity and $25,000 in new capital assets will be required. If so, what is the need? Assets Answer: KA K Clyde's Well Servicing has the following financial statements. The balance sheet items, profit margin, and dividend payout have maintained the same relationships the past couple of years; these relationships are anticipated to hold in the future. Income Statement Sales ..... $2,000,000 Cost of goods sold 1,260,000 Gross profit.... 740,000 Selling and administrative expense. 400,000 Amortization....... 55,000 Earnings before interest and taxes 285,000 Interest 50.000 Earnings before taxes 235,000 Taxes ....... 61,000 Earnings available to common shareholders. $ 174,000 Dividends paid. $ 104,400 Balance Sheet Llabilities and Shareholders' Equity Cash $ 30,000 Accounts payable. $ 105,000 Accounts receivable. 260,000 Accruals 20,000 Inventory...... 210,000 Bank loan .... 150,000 Current assets. 500,000 Current liabilities 275,000 Capital assets. 550,000 Long-term debt. 200,000 Common stock 175,000 Retained earnings.. 400,000 Total assets. $1.050,000 Total liabilities and equity.... $1,050.000 1. Using a percent-of-sales method, determine whether Clyde's can handle a 30 percent sales increase without using external financing, assuming there is no capacity and $25,000 in new capital assets will be required. If so, what is the need? Assets