a. Long-term debt in 2018 = $ 280,000.
( Long-term debt = Total Assets - Accounts Payable - Common Stock - Retained Earnings = $ ( 1,620,000 - 565,000 - 400,000 - 375,000 ) = $ 280,000.
Total liabilities in 2018 = $ 845,000
( Total Liabilities = Long-term debt + Accounts Payable = $ 280,000 + $ 565,000 = $ 845,000 )
b. New long-term debt financing needed in 2019 : $ 15,875.
AFN = ( $ 1,620,000 / $ 2,900,000 ) * $ 725,000 - ( $ 565,000 / $ 2,900,000 ) * $ 725,000 - $ 3,625,000 x 6 % x 45 % = $ 405,000 - $ 141,250 - $ 97,875 = $ 165,875.
New long-term debt = AFN - New Stock = $ 165,875 - $ 150,000 = $ 15,875.
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