Ernest runs an art gallery. He organises exhibitions at which painters and sculptors show their work. If a piece of art work is sold, Ernest takes a commission of 50% of the selling price. He banks the cash and then pays out what is due to the artists. He held a successful exhibition in November, and is planning the next one for January. Each time he holds an exhibition he pays for advertising and sending out leaflets to people on his mailing list, and also for wine and soft drinks on the opening night of the exhibition. Putting on the exhibition in January will cost him around £4000.

Ernest has the following assets and liabilities at 31 December:

Gallery premises 68 000 Cash at bank 18 600 Amounts payable to artists 16 560 Office equipment 2 260 Amounts payable to printers for publicity material for recent exhibition 1 600 Capital 70 700 1. Prepare Ernest's balance sheet at 31 December.

2. Write a brief assessment of Ernest's business position as shown by the balance sheet.