Based on the Statemets below answer the following questions:

a.Suppose 2016 sales are projected to increase by 15% over 2015 sales. Use the forecasted financial statement method to forecast a balance sheet and income statement for December 31, 2016. The interest rate on all debt is 10%, and cash earns no interest income. Assume that all additional debt in the form of a line of credit is added at the end of the year, which means that you should base the forecasted interest expense on the balance of debt at the beginning of the year. Use the forecasted income statement to determine the addition to retained earnings. Assume that the company was operating at full capacity in 2015, that it cannot sell off any of its fixed assets, and that any required financing will be borrowed as notes payable. Also, assume that assets, spontaneous liabilities, and operating costs are expected to increase by the same percentage as sales. Determine the additional funds needed.

b. What is the resulting total forecasted amount of the line of credit?

c. In your answers to Parts a and b, you should not have charged any interest on the additional debt added during 2016 because it was assumed that the new debt was added at the end of the year. But now suppose that the new debt is added throughout the year. Dont do any calculations, but how would this change the answers to parts a and b?

9-8 Financing Deficit Stevens Textiles' 2015 financial statements are shown below: Balance Sheet as of December 31, 2015 (Thousands of Dollars) Cash Receivables Inventories $ 1,080 6,480 9,000 $16,560 12,600 $ 4,320 2,880 0 2,100 $ 9,300 3,500 3,500 12,860 $29,160 Accounts payable Accruals Line of credit Notes payable Total current assets Net fixed assets Total current liabilities Mortgage bonds Common stock Retained earnings Total assets $29,160 Total liabilities and equity Income Statement for December 31, 2015 (Thousands of Dollars) $36,000 32,440 $ 3,560 460 $ 3,100 1,240 S 1,860 $ 837 $1,023 Sales Operating costs Earnings before interest and taxes Interest Pre-tax earnings Taxes (40%) Net income Dividends (45%) Addition to retained earnings