Lisa Langely is a young entrepreneur who operates Langely Music Services, offering singing lessons and instruction on musical instruments. Langely wishes to expand but needs a $15,000 loan. The bank requests Langely to prepare a balance sheet and key financial ratios. Langely has not kept formal records but is able to provide the following accounts and their amounts as of December 31, 2011.

Required
1. Prepare a balance sheet as of December 31, 2011, for Langely Music Services. (Report only the total equity amount on the balance sheet.)
2. Compute Langely€™s debt ratio and its return on assets (the latter ratio is defined in Chapter 1). Assume average assets equal its ending balance.
3. Do you believe the prospects of a $15,000 bank loan are good? Why or whynot?

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1,800 Accounts Receivable..$4800 Prepaid Insurance .. 750 25.000 Cash Prepaid Rent... Accounts Payable100 Unearned Lesson Fees Annual net income. 4.700 Store Supplies 3,300 Equipment 7.800 Total Equity.31.450 20,000