accounting 459073

2-8 These financial statement items are for Barone Corporation at year-end, July 31, 2010.

Salaries Payable 2,080

Salaries Expense 51,700

Utilities expense 22,600

Equipment 18,500

Accounts Payable 4,000

Commission revenue 66,100

Rent revenue 8,500

Long-term note payable 1,800

Common Stock 16,000

Cash 29,200

Accounts Receivable 9,780

Accumulated depreciation 6,000

Dividends 4,000

Depreciation expense 4,000

Retained earnings 35,200

Suppose that you are the president of Allied Equipment. Your sales manager has approached you with a proposal to sell $20,000 of equipment to Barone. He would like to provide a loan to Barone in the form of 10%, 5-year note payable. Evaluate how this loan would change Barrone’s current ratio and debt to total assets ratio and discuss whether you would make the sale.