Two textile companies, McDaniel-Edwards Manufacturing and Jordan-Hocking Mills, began operations with identical balance sheets. A year later both required additional manufacturing capacity at a cost of $200,000. McDaniel-Edwards obtained a 5-year, $200,000 loan at an 8% interest rate from its bank. Jordan-Hocking, on the other hand, decided to lean the required $200,000 capacity from National Leasing for 5 years; an 8% return was build into the lease. The balance sheet for each company, before the asset increase, is as follows:

Debt $200,000

Equity $200,000

Total assets $400,000

Total liabilities and equity $400,000

A) Show the balance sheet of each firm the asset increase ans calculate each firm's new debt ratio. ( Assume that Jordan-Hocking's lease lease is kept off the balance sheet)