Van Auken Lumbers 2013 financial statements are shown below.

Van Auken Lumber: Balance Sheet as of December 31, 2013 (Thousands of Dollars)

Cash	$1,800		Accounts payable	$7,200
Receivables	10,800		Notes payable	3,472
Inventories	12,600		Accrued liabilities	2,520
Total current assets	$25,200		Total current liabilities	$13,192
			Mortgage bonds	5,000
Net fixed assets	21,600		Common stock	2,000
			Retained earnings	26,608
Total assets	$46,800		Total liabilities and equity	$46,800

Van Auken Lumber: Income Statement for Dec 31, 2013 (Thousands of Dollars)

Sales	$36,000
	Operating costs including depreciation	30,783
	Earnings before interest and taxes	$5,217
	Interest	1,017
	Earnings before taxes	$4,200
	Taxes (40%)	1,680
	Net income	$2,520
	Dividends (60%)	$1,512
	Addition to retained earnings	$1,008

a. Assume that the company was operating at full capacity in 2013 with regard to all items except fixed assets, which in 2013 were being utilized to only 75% of capacity. By what percentage could 2014 sales increase over 2013 sales without the need for an increase in fixed assets?

b. Now suppose that 2014 sales increase by 25% over 2013 sales. Use the forecasted financial statement method to forecast a 12/31/14 balance sheet and 2014 income statement, assuming that (1) the historical ratios of operating costs/sales, cash/sales, receivables/sales, inventories/ sales, accounts payable/sales, and accruals/sales remain constant; (2) Van Auken cannot sell any of its fixed assets; (3) any required financing is done at the end of 2014 as through a line of credit; (4) the firm earns no interest on its cash; and (5) the interest rate on all of its debt is 12%. Van Auken pays out 60% of its net income as dividends and has a tax rate of 40%. What is Van Aukens financing deficit or surplus? (Hints:Assume any additional financing through the line of credit will be drawn on the last day of the year. Therefore, the line of credit will not accrue interest expense during the year because any new line of credit is added at the end of the year; also, use the forecasted income statement to determine the addition to retained earnings for use in the balance sheet.)