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

Income StatementSales$200,000Expenses162,800Earnings before interest and taxes$37,200Interest2,200Earnings before taxes$35,000Taxes11,000Earnings after taxes$24,000Dividends$7,200

Balance SheetAssetsLiabilities and Shareholders' EquityCash$4,000Accounts payable$7,200Accounts receivable12,000Accrued wages1,400Inventory17,000Accrued taxes3,400Current assets$33,000Current liabilities$12,000Capital assets72,000Notes payable7,200Long-term debt16,000Common stock22,000Retained earnings47,800Total assets$105,000Total liabilities and equity$105,000

Longbranch is expecting a 30 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(Click to select)needshas$in(Click to select)external fundssurplus funds.

b.Prepare pro forma balance sheet with any financing adjustment made to notes payable.(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 SheetCurrent assetsLiabilities(Click to select)Capital AssetNotes payableCashAccounts receivableInventory$(Click to select)Retained earningsAccounts payableCommon stockAccrued wagesAccrued taxes$(Click to select)Capital AssetAccounts receivablePrepaid expensesCashInventory(Click to select)Accrued wagesRetained earningsAccounts payableCommon stockLong-term debt(Click to select)Gross plantCashAccounts receivablePrepaid expensesInventory(Click to select)Accrued taxesRetained earningsAccounts payableCommon stockLong-term debtCurrent assets$Current liabilities$(Click to select)InventoryCapital AssetsAccrued wagesAccounts ReceivableCash(Click to select)Accounts payableNotes payableNotes receivableLong term liabilitiesRetained earnings(Click to select)Long-term debtAccrued wagesAccounts payableAccrued taxes$(Click to select)Common stockAccrued wagesAccounts payableAccrued taxes(Click to select)Retained earningsAccrued wagesAccounts payableAccrued taxesTotal assets$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 1Year 2Current ratioXXTotal debt/ assets%%

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