These financial statement items are for Fairview Corporation at year-end, July 31, 2017. Salaries and wages payable

Question:

These financial statement items are for Fairview Corporation at year-end, July 31, 2017.

Salaries and wages payable ...................................$ 2,080

Salaries and wages expense ................................... 57,500

Supplies expense ............................................... 15,600

Equipment ...................................................... 18,500

Accounts payable ............................................. 4,100

Service revenue ................................................ 66,100

Rent revenue ................................................... 8,500

Notes payable (due in 2020) ................................. 1,800

Common stock ................................................ 16,000

Cash ............................................................ 29,200

Accounts receivable .......................................... 9,780

Accumulated depreciation-equipment ................... 6,000

Dividends ..................................................... 4,000

Depreciation expense....................................... 4,000

Retained earnings (beginning of the year) ................. 34,000

Instructions

(a) Prepare an income statement and a retained earnings statement for the year. Fairview Corporation did not issue any new stock during the year.

(b) Prepare a classified balance sheet at July 31.

(d) Suppose that you are the president of Lunar Equipment. Your sales manager has approached you with a proposal to sell $20,000 of equipment to Fairview. He would like to provide a loan to Fairview in the form of a 10%, 5-year note payable. Evaluate how this loan would change Fairview's current ratio and debt to assets ratio, and discuss whether you would make the sale

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