These financial statement items are for Fairview at year-end, July 31, 2022.
Instructions
a. Prepare an income statement and a retained earnings statement for the year. Fairview did not issue any new stock during the year.
b. Prepare a classifi ed at July 31.
c. Compute the current ratio and debt to assets ratio.
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.
