Louis Davis is a dentist with a practice (Davis Dentistry Ltd) in a small town in Ontario. Recently, he separated from his wife and they are currently negotiating how they will divide their assets when their divorce proceedings conclude. As part of the process, Louis lawyer has asked for a balance sheet for his dental practice to help value it. Louis has asked you to prepare the balance sheet. You gather the following information from Louis: i. Louis purchased all his equipment eight years ago when he started his practice. The total cost of all the equipment was $100,000. He expects to replace all the equipment in four years, at which time the equipment will have no residual value. ii. He purchased furniture and decorations for his office four years ago for $22,000. He expects the furniture and decorations to last for about ten years. iii. Patients owe Louis $19,000. iv. Louis owes suppliers $12,000 for goods and services he purchased for his practice. v. The practice has $4,750 in its bank account. vi. Louis owes his staff $2,500. This amount will be paid on the next payday, in two weeks. vii. Louis has a bank loan outstanding for $10,000 and owes this amount to Peoples Bank. viii. Louis keeps supplies he needs in his practice. The cost of the supplies he currently has on hand is $750.

Requirements: 1. Use the information provided to prepare a balance sheet for Louis dental practice. Provide an explanation for why you classified each item as you did on the balance sheet, or why you did not include it (asset, liability, equity). [Hint: You must calculate Louis equity as it is not given to you. The difference between assets and liabilities will give you Louis equity.]

2. As a judge in this case, how would you use the balance sheet in deciding how to value Louis practice so that the value can be split between Louis and his wife in the divorce proceeds?

3. What additional information would you as judge might want before deciding how to value Louis practice?