Salvador Industries bought land and built its plant 20 years ago. The depreciation on the building is calculated using the straight-line method, with a life of 30 years and a salvage value of $50,000. Land is not depreciated. The depreciation for the equipment, all of which was purchased at the same time the plant was constructed, is calculated using declining balance at 20 percent. Salvador currently has two outstanding loans: one for $50,000 due December 31, 2013, and another one for which the next payment is due in four years. During April 2013, there was a flood in the building because a nearby river overflowed its banks after unusually heavy rain. Pumping out the water and cleaning up the basement and the first floor of the building took a week. Manufacturing was suspended during this period and some inventory was damaged. Because of lack of adequate insurance, this unusual and unexpected event cost the company $100,000 net. (a) Fill in the blanks and complete a copy of the balance sheet and income statement here, using any of the above information you feel is necessary.

(b) Show how information from financial ratios (Calculate financial ratios) can indicate whether Salvador Industries can manage an unusual and unexpected event such as the flood without threatening its existence as a viable business.