At year-end 2013, Wallace Landscaping’s total assets were $1.4 million and its a

Question

At year-end 2013, Wallace Landscaping’s total assets were $1.4 million and its accounts payable were $435,000. Sales, which in 2013 were $2.2 million, are expected to increase by 30% in 2014. 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 $460,000 in 2013, and retained earnings were $225,000. Wallace has arranged to sell $195,000 of new common stock in 2014 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 2014. (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 7%, and 60% of earnings will be paid out as dividends.

What was Wallace's total long-term debt in 2013? Round your answer to the nearest dollar.
$   
What were Wallace's total liabilities in 2013? Round your answer to the nearest dollar.
$   

How much new long-term debt financing will be needed in 2014? (Hint: AFN - New stock = New long-term debt.) Round your answer to the nearest dollar.
$

Explanation / Answer

Total Assets = Total Liabilities 1400000 Less: Common Stock 460000 Retained Earnings 225000 Accounts Payable 435000 1120000 Long Term Debt (Balance) 280000 Total Liabilities = Total Assets = $ 1400000 2014 Sales of 2013 2200000 Sales of 2014 (1.30*2200000) 2860000 Profit 200200 Less Dividend 120120 Retained Earnings 80080 Total Assets (1.4/2.2*2860000) 1820000 Less: Common Stock 655000 Retained Earnings 305080 Accounts Payable (435/2200*2860000) 565500 1525580 New long term need of 2014 294420

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