ANSWER:

(a)

Total Assets $1,200,000

Common Stock $425,000

Retained Earnings $295,000

Total Debt (2015) $480,000

(b)

Total Assets $1,200,000

Account Payable $375,000

Sales (2015) $2,500,000

Expected Growth in Sales 25%

Increase in Sales $625,000

Expected Sales (2016) $3,125,000

Profit Margin on Sales 6%

Retention Ratio 60%

Additional Financing Needed = (((Assets/Sales)*Change in Sales) - ((Accounts Payable/Sales)*Change in

Sales) - Profit Margin*Expected Sales*Retention Ratio)

Additional Fund Needed (AFN) $93,750

New Stock $75,000

New Long-term Debt Needed (2016) $18,750 Additional Funds Needed - New Stock