These are the simplified financial statements for Johns Car Rental.
|
Income statement
|
Current
|
Projected
|
|
Sales
|
na
|
1,000
|
|
Costs
|
na
|
700
|
|
Profit before tax
|
na
|
300
|
|
Taxes
|
na
|
90
|
|
Net income
|
na
|
210
|
|
Dividends
|
na
|
63
|
|
|
|
|
Balance sheets
|
Current
|
Projected
|
|
Current assets
|
100
|
115
|
|
Net fixed assets
|
900
|
1,080
|
|
Current liabilities
|
70
|
81
|
|
Long-term debt 400
|
|
|
Common stock 300
|
|
|
Retained earnings 230
|
|
|
|
|
|
a. What is Johns' projected addition to retained earnings under this plan? Explain
b. If John does not plan on issuing new stock and will finance any shortfall by issuing additional long-term debt what will be the Long-term debt for the projected year (including the additional financing)? Explain