At year-end 2021, total assets for Arrington Inc. were $1.7 million and accounts payable were $350,000. Sales, which in 2021 were $2.60 million, are expected to increase by 25%in 2022. 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 typicallyuses no current liabilities other than accounts payable. Common stock amounted to $405,000 in 2021, and retained earnings were $285,000. Arrington plans to sell new commonstock in the amount of $160,000. The firm's profit margin on sales is 5%; 50% of earnings will be retained.a. What were Arrington's total liabilities in 2021? Write out your answer completely. For example, 25 million should be entered as 25,000,000. Round your answer to thenearest cent.b. How much new long-term debt financing will be needed in 2022? (Hint: AFN - New stock = New long-term debt.) Write out your answer completely. For example, 25million should be entered as 25,000,000. Do not round intermediate calculations. Round your answer to the nearest cent.

For any entity or business the total assets will always be equal to total liabilities. Hence total…

a. What were Arrington's total liabilities in 2021? Write out your answer completely. For example, 25 million should be entered as 25,000,000. Round your answer to the nearest cent. $ b. How much new long-term debt financing will be needed in 2022? (Hint: AFN - New stock = New long-term debt.) Write out your answer completely. For example, 25 million should be entered as 25,000,000. Do not round intermediate calculations. Round your answer to the nearest cent. $

a. What were Arrington's total liabilities in 2021? Write out your answer completely. For example, 25 million should be entered as 25,000,000. Round your answer to the nearest cent. $ b. How much new long-term debt financing will be needed in 2022? (Hint: AFN - New stock = New long-term debt.) Write out your answer completely. For example, 25 million should be entered as 25,000,000. Do not round intermediate calculations. Round your answer to the nearest cent. $

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

At year-end 2021, total assets for Arrington Inc. were $1.7 million and accounts payable were $350,000. Sales, which in 2021 were $2.60 million, are expected to increase by 25%
in 2022. 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 $405,000 in 2021, and retained earnings were $285,000. Arrington plans to sell new common
stock in the amount of $160,000. The firm's profit margin on sales is 5%; 50% of earnings will be retained.
a. What were Arrington's total liabilities in 2021? Write out your answer completely. For example, 25 million should be entered as 25,000,000. Round your answer to the
nearest cent.
b. How much new long-term debt financing will be needed in 2022? (Hint: AFN - New stock = New long-term debt.) Write out your answer completely. For example, 25
million should be entered as 25,000,000. Do not round intermediate calculations. Round your answer to the nearest cent.

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Step 1: Total Assets = Total liabilities

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Step 2: (a) Calculation of Arrington's Total Liabilities in 2021:

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Step 3: Calculation of long-term debt balance in 2021:

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Step 4: Calculation of Total liabilities of Arrington Inc in 2022:

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Step 5: Calculation of long term debt balance in 2022:

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Step 6: b) Calculation of New long term debt financing needed in 2022:

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