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

Income Statement

Sales $ $200,000$

Expenses $162,800$

Earnings before interest and taxes $ $37,200$

Interest $2,200$

Earnings before taxes $ $35,000$

Taxes $11,000$

Earnings after taxes $ $24,000$

Dividends $ $7,200$

Balance Sheet

Assets Liabilities and Shareholders' Equity

Cash $$4,000$ Accounts payable $$7,200$

Accounts receivable $12,000$ Accrued wages $1,400$

Inventory $17,000$ Accrued taxes $3,400$

Current assets $$33,000$ Current liabilities $$12,000$

Capital assets $72,000$ Notes payable $7,200$

Long$-$term debt $16,000$

Common stock $22,000$

Retained earnings $47,800$

Total assets $$105,000$ Total liabilities and equity $$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 $ in $.$

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

$ $

Current assets $ Current liabilities $

$

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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