Balance sheet effects of leasing Two textile companies, McDaniel Edwards Manufacturing and Jordan Hocking Mills, began operations with identical balance sheets A year later both required additional manufacturing capacity at a cost of $150,000 McDaniel Edwards obtained a 5 year, $100,000 loan at an 7 interest rate from its bank Jordan Hocking, on the other hand, decided to lean the required$100,000 capacity from National Leasing for 5 years an 7 return was build into the lease The balance sheet for each company, before the asset increase, is as follows Debt $150,000 Equity $100,000 Total assets $250,000 Total liabilities and equity $250,000 Show the balance sheet of each firm after the assets, and calculate each firm's new debt ratio (Assume that Jordan Hocking's lease is kept off the balance sheet ) Round your answers to the whole number Debt assets ratio for McDaniel Edwards Debt assets ratio for Jordan Hocking Show how Jordan Hocking's balance sheet would have looked immediately after the financing if had capitalized the lease Round your answer to the whole number

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Question: Balance sheet effects of leasing Two textile companies, McDaniel-Edwards Manufacturing and Jordan-Hocking Mills, began operations with identical balance sheets. A year later both required additional

Balance sheet effects of leasing

Two textile companies, McDaniel-Edwards Manufacturing and Jordan-Hocking Mills, began operations with identical balance sheets. A year later both required additional manufacturing capacity at a cost of $150,000. McDaniel-Edwards obtained a 5-year, $100,000 loan at an 7% interest rate from its bank. Jordan-Hocking, on the other hand, decided to lean the required$100,000 capacity from National Leasing for 5 years; an 7% return was build into the lease. The balance sheet for each company, before the asset increase, is as follows:

		Debt	$150,000
		Equity	$100,000
Total assets	$250,000	Total liabilities and equity	$250,000

Show the balance sheet of each firm after the assets, and calculate each firm's new debt ratio. (Assume that Jordan-Hocking's lease is kept off the balance sheet.) Round your answers to the whole number.

Debt/assets ratio for McDaniel-Edwards = --------%

Debt/assets ratio for Jordan-Hocking = -------- %

Show how Jordan-Hocking's balance sheet would have looked immediately after the financing if had capitalized the lease. Round your answer to the whole number.

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