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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
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.
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