Wallace total long-term debt and total liabilities

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At year-end 2016, Wallace Landscaping's total assets were $2.17 million, and its accounts payable were $560,000. Sales, which in 2016 were $3.5 million, are expected to increase by 35% 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 $625,000 in 2016, and retained earnings were $395,000. Wallace has arranged to sell $195,000 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 net profit margin on sales is 5%, and 45% of earnings will be paid out as dividends.

a) What were Wallace's total long-term debt and total liabilities in 2016?

b) How much new long-term debit financing will be needed in 2017? (Hint: AFN - New stock = New long-term debt.)

Reference no: EM133114915

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