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LONG-TERM FINANCING NEEDED At year-end 2019, total assets for Arrington Inc. were $1.8 million and accounts...

LONG-TERM FINANCING NEEDED At year-end 2019, total assets for Arrington Inc. were $1.8 million and accounts payable were $450,000. Sales, which in 2019 were $3.0 million, are expected to increase by 25% in 2020. Total assets and accounts payable are proportional to sales, and that relationship will be maintained; that is, they will grow at the same rate as sales. Arrington typically uses no current liabilities other than accounts payable. Common stock amounted to $500,000 in 2019, and retained earnings were $475,000. Arrington plans to sell new common stock in the amount of $130,000. The firm’s profit margin on sales is 5%; 35% of earnings will be retained.

  1. What were Arrington’s total liabilities in 2019?

    Answer

    $825,000

  2. How much new long-term debt financing will be needed in 2020? (Hint: AFN - New stock = New long-term debt.)

    Answer

    $141,875

** NEED HELP FINDING CORRECT ANSWERS FOR 2

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