These financial statement items are for Fairview Corporation at year-end, July 31, 2022. 

Instructions 

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

b. Prepare a classifi ed balance sheet at July 31. 

c. Compute the current ratio and debt to assets ratio. 

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

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$ 2,080 Salaries and wages payable Salaries and wages expense Supplies expense Equipment Accounts payable 57,500 15,600 18,500 4,100 Service revenue 66,100 $ 8,500 Rent revenue Notes payable (due in 2025) 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) 4,000 34,000