MNO Inc. presents the following figures:

Assets:

• Cash: $12,000
• Accounts Receivable: $32,000
• Inventory: $38,000
• Prepaid Expenses: $4,000

Liabilities:

• Accounts Payable: $16,000
• Short-term Debt: $12,000

Equity:

• Common Stock: $70,000
• Retained Earnings: $90,000

Requirements:

1. Draft the adjusted trial balance.
2. Calculate the current ratio and quick ratio.
3. Journalize the following adjustments:
   • Depreciation of machinery: $4,000
   • Bad debts expense: $1,800
4. Prepare a statement of retained earnings.
5. Discuss the importance of maintaining a strong equity position.

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YZA Inc. Balance Sheet as of [Date]

Assets

• Current Assets:
  • Cash: $20,000
  • Accounts Receivable: $15,000
  • Inventory: $25,000

Total Current Assets: $60,000

• Fixed Assets:
  • Equipment: $50,000
  • Accumulated Depreciation: ($15,000)

Net Fixed Assets: $35,000

Total Assets: $95,000

Liabilities and Equity

• Current Liabilities:
  • Accounts Payable: $10,000
  • Notes Payable: $12,000

Total Current Liabilities: $22,000

• Equity:
  • Common Stock: $30,000
  • Retained Earnings: $33,000

Total Equity: $63,000

Total Liabilities and Equity: $95,000