This is my third time posting this question. Please put answers like thia: 1.ANS
ID: 2749896 • Letter: T
Question
This is my third time posting this question. Please put answers like thia: 1.ANSWER 2.ANSWER, etc. THANK YOU
Balance sheet effects of leasing
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 $175,000. McDaniel-Edwards obtained a 5-year, $175,000 loan at an 11% interest rate from its bank. Jordan-Hocking, on the other hand, decided to lease the required $175,000 capacity from National Leasing for 5 years; an 11% return was built into the lease. The balance sheet for each company, before the asset increases, is as follows:
Show the McDaniel-Edwards' balance sheet after the asset increase. Round your answers to two decimal places.
Calculate McDaniel-Edwards' new debt ratio. Round your answer to two decimal places.
5. %
Show the Jordan-Hocking's balance sheet after the asset increase. (Assume lease is kept off the balance sheet.) Round your answers to two decimal places.
Calculate Jordan-Hocking's new debt ratio. Round your answers to two decimal places.
10. %
Show how Jordan-Hocking's balance sheet would have looked immediately after the financing if it had capitalized the lease. Round your answers to two decimal places.
Debt $200,000 Equity 200,000 Total assets $400,000 Total liabilities and equity $400,000Explanation / Answer
Answer:
McDaniel-Edwards' balance sheet after the asset increase
5. McDaniel-Edwards' new debt ratio
Jordan-Hocking's balance sheet after the asset increase
10. Jordan-Hocking's new debt ratio
Jordan-Hocking's Balance sheet after lease is capitalized
Debt: (200000+175000) 1. $375000 Equity 2. $200000 Total Assets 3. $575000 Total Liabilities & Equity 4. $575000Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.