Lydia Trottier has prepared baked goods for sale since 2001. She started the baking business in her home and has been operating in a rented building with a storefront since 2006. Lydia incorporated the business as MLT Inc. on January 1, 2023, with an initial share issue of 1,000 common shares for $2,500. Lydia is the principal shareholder of MLT Inc. Sales have increased by 30% annually since operations began at the present location, and additional equipment is needed for the continued growth that is expected. Lydia wants to purchase some additional baking equipment and to finance the equipment through a long-term note from a commercial bank. Fidelity Bank & Trust has asked Lydia to submit a statement of income for MLT for the first five months of 2023 and a statement of financial position as at May 31, 2023. Lydia assembled the following information from the corporation's cash basis records to use in preparing the financial statements that the bank wants to see: 1. 2 The bank statement showed the following 2023 deposits through May 31: Issuance of common shares Cash sales Rebates from purchases of raw materials Collections on credit sales Bank loan proceeds Raw materials Rent Salaries and wages Repairs and maintenance Utilities $2,500 22,770 Insurance premium Equipment Principal and interest payment on bank loan 130 The following amounts were disbursed through May 31, 2023: 5,320 2,880 $33,600 $14,400 1,800 5,500 110 4,000 1,920 3,600 298

istue of 1000 commen thares for $2500 tydiais the principal shareholter of Me1 ine sale have incremed by 30 os misilly since oceratiors began at the proent location and adsicional equipruent is needed foe the fwe months of 2023 and s statemeit of financispritso as at Myy 31,2093 the bark wanti to sere 1. the banis statement ghownd the following 2023 drposits thesigh May 31 2. The followirs amounts wer e dubursed themigh Mur 31.2023 3. Unouid invoices at May 31.2023 were as follom: 4. Ncounts rectivable cecords thowed uncosecsedsales of 34,336 at Myy a1 2022 5. Aav materials imentory condins $2075 was en hand at Myy 31. 2003. There were no materials in bacess or finidhed goods on hand at that date Noeaw materials were on hand er if process and no frimhted goods were coi hand at lahuary 1, 2023. quarterfy cuyments on April 1, hily 1, Dctober 1. and dantary 1. fach parreert is to consiat of equal piencipal paytitents (\$2.890 +(Dw4)=$740) plut aceried inlerest wece the last phenent 7. Froplopees have been puld through May 25. 29e3, and are due an atgatonal 5270 on May 31. 2023. 8. Cquipment costing 53,600 was purchased on danuar?, 2023, and ha6 an estimated vseful life of frve rams with no residual value. Straigh line depreciation is used, 9. Rent was paid for six mootin in advance on lamary? 2023. 10. A one year insurance policy was purcturied on January? 2.292 11. MtT is subject te an income tak iate of 200 . Na tak instalments huve been paid 12. Payments and collections from the unincerporated business through December 31,2022 , were not inchuded in the corporations cecocds, and no cawhwas transterred from the unincorporated buainess to the corporatian- Using the atcrual baks of accounting prepare a st Sement of incerne for the five months ended Muy 31; 2023, \$Round eamings per thare vilue to 2 decinal places, es. 527 and ether values to 0 decinul places es 5.275j enswers to 0 dedind places, es 5275j Assume the role of a bankmanager at Fidefity Bank \& Trust. Calculate MLT's current ratio as a measure of Deculdity, and times interest earned ratio as a measure of MLT'sability to pay interest (Round answers to 2 decimal ploces. eg. 52.75) Current ratio Times interest earned ratio times Would you recommend extending a long-term note for furancing of MLT s purchase of additional baking equipment? eTextbook and Media