The accounts for the balance sheet, statement of changes in equity, and income statement of Sarmiento Auditing Services are properly adjusted and appear as follows. It required arranging the accounts below, preparing a proper adjusted trial balance, preparing the Income Statement, Statement of Changes in Equity, and Statement of Financial Position of Sarmiento Auditing Services

Accounts Payable 63,500 Accounts Receivable 198,000 Accumulated Depreciation- Building 110,000 Accumulated Depreciation- Office Equipment 120,000 Auditing Revenues 1,361,500 Building 750,000 Cash 118,500 Depreciation Expense- Building 55,000 Depreciation Expense- Office Equipment 60,000 Sarmiento, Capital, 01/01/2020 1,193,500 Sarmiento, Drawings 165,000 Land 75,000 Notes Receivable 60,000 Office Equipment 362,500 Office Supplies Expense 96,000 Office Supplies 28,000 Professional Development Expense 86,500 Rent Expense 52,500 Salaries Expense 735,000 Salaries Payable 30,500 Travel Expense 41,000 Utilities Expense 18,000 Additional information: During the year, Sarmiento invested additional P22,000 in the business. 1I, ESSAY 1. After preparing the income statement, is the entity profitable or not? Why do you say so ? 2. Based on the statement of financial position, does the entity has the ability to pay its current obligations? Why do you say so