The accounting records of Tama Co. show the following assets and liabilities as of December 31, 2012 and 2013.

Late in December 2013, the business purchased a small office building and land for $300,000. It paid $50,000 cash toward the purchase and a $250,000 note payable was signed for the balance. Joe Tama, the owner, had to invest an additional $15,000 cash to enable it to pay the $50,000 cash toward the purchase. The owner withdraws $250 cash per month for personal use.
Required 1. Prepare balance sheets for the business as of December 31,2012 and 2013. (Hint: Report only total equity on the balance sheet and remember that total equity equals the difference between assets and liabilities.)
2. By comparing equity amounts from the balance sheets and using the additional information presented in the problem, prepare a calculation to show how much net income was earned by the business during 2013.
3. Calculate the December 31, 2013, debt ratio (in percent and rounded to one decimal).

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December 31 Cash 2012 2013 $20,000 $ 5,000 Accounts receivable 35,000 25,000 Office supplies.... 8,000 13,500 Office equipment 40,000 40,000 Machinery 28,500 28,500 Building 0 250,000 Land 0 50,000 Accounts payable 4,000 12,000 Note payable.. 0 250,000