At year-end 2016, Wallace Landscaping’s total assets were $1.9 million and its accounts payable were $390,000....

At year-end 2016, Wallace Landscaping’s total assets were $1.9 million and its accounts payable were $390,000. Sales, which in 2016 were $2.3 million, are expected to increase by 25% in 2017. Total assets and accounts payable are proportional to sales, and that relationship will be maintained. Wallace typically uses no current liabilities other than accounts payable. Common stock amounted to $380,000 in 2016, and retained earnings were $240,000. Wallace has arranged to sell $100,000 of new common stock in 2017 to meet some of its financing needs. The remainder of its financing needs will be met by issuing new long-term debt at the end of 2017. (Because the debt is added at the end of the year, there will be no additional interest expense due to the new debt.) Its profit margin on sales is 4%, and 60% of earnings will be paid out as dividends.

What was Wallace's total long-term debt in 2016? Round your answer to the nearest dollar.
$
What were Wallace's total liabilities in 2016? Round your answer to the nearest dollar.
$

How much new long-term debt financing will be needed in 2017? (Hint: AFN - New stock = New long-term debt.) Round your answer to the nearest dollar.
$

Solutions

Expert Solution

Balance Sheet for the year ended 2016

Liabilty & Equity
Common Stock	$ 3,80,000.00	Total Asset	$ 19,00,000.00
Retained Eranings	$ 2,40,000.00
Accounts Payable	$ 3,90,000.00
Long term Debt	$ 8,90,000.00
	$ 19,00,000.00		$ 19,00,000.00

Balance Sheet for the year ended 2017


Common Stock	$ 4,80,000.00	Total Asset	$ 23,75,000.00
Retained Eranings	$ 2,86,000.00
Accounts Payable	$ 4,87,500.00
Long term Debt	$ 11,21,500.00
	$ 23,75,000.00		$ 23,75,000.00

The Debt in 2016 = Total Asset - Total Common Equity - Retained earnings -Accounts payable,

= $19,00,000-$380,000- $240,000-$390,000 =,

Common Stock	$ 3,80,000.00
Retained Eranings	$ 2,40,000.00
Accounts Payable	$ 3,90,000.00
Long term Debt	$ 8,90,000.00

Total liability including Equity = 1900,000,

Excluding Equity =$1280000...

Answer to next Questions =

Sales was 2.3 Million, but sales in2017 is of 125% of 2016 . and we have to arrive the proportional payable, Total Asset & sales = Accounts payable = 390000*125%, Sale after 2016 = 2.3 millionX125%, Total Asset = $19,00,000*125%, Retained Earnings = 2.3 millionX125%X4%(Margin %) X 40% ( because our pay out is 60%, so we need ro take the retaining %), we will increase the equity by $ 100,000, So new Equity Common stock will be $480,000.

The Debt in 2017 = Total Asset - Total Common Equity - Retained earnings -Accounts payable,

=2.375 Millions - 0.48 Million - 0.286 Millions - 0.4875 million = 1.0215 Million, $231500.

Please rate the answer max...

Tank you...

New additional debt = Total Longterm Debt - Old LongTterm debt. =$1121500 -

jeff jeffy answered 1 year ago

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