prepare financial statements 459526

These financial statement items are for Whitnall Corporation at year-end, July 31, 2012.

Salaries and wages payable $ 2,080

Salaries and wages expense 57,500

Supplies expense 15,600

Equipment $18,500

Accounts payable 4,100

Service revenue 66,100

Rent revenue 8,500

Notes payable (due in 2015) 1,800

Common stock 16,000

Cash 29,200

Accounts receivable 9,780

Accumulated depreciation”equipment 6,000

Dividends 4,000

Depreciation expense 4,000

Retained earnings (beginning of the year) 34,000

Instructions

(a) Prepare an income statement and a retained earnings statement for the year. Whitnall Corporation did not issue any new stock during the year.

(b) Prepare a classified balance sheet at July 31.

(c) Compute the current ratio and debt to total assets ratio.

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