Angel Fender is a young entrepreneur who operates Fender Music Services, offering singing lessons and instruction on musical instruments. Fender wishes to expand but needs a $30,000 loan. The bank requests Fender to prepare a balance sheet and key financial ratios. Fender has not kept formal records but is able to provide the following accounts and their amounts as of December 31, 2009.

* The total equity amount reflects all owner investments, dividends, revenues, and expenses as of December 31, 2009.
Required
1. Prepare a balance sheet as of December 31, 2009, for Fender Music Services. (Report only the total equity amount on the balance sheet.)
2. Compute Fender€™s debt ratio and its return on assets (defined as: Net income divided by Average total assets). Assume average assets equal its ending balance.
3. Do you believe the prospects of a $30,000 bank loan are good? Why or whynot?

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Cash . . . . . . . . . . . . . . $ 3,600 Accounts Receivable . . . 9,600 Prepaid Insurance . . . . . S 1,500 Prepaid Rent ......9.400 Store Supplies ...6,600 Equlpment ......50,000 Accounts Payable... Annual net Income40,000 2.200 Unearned Lesson Fees . . 15,600 Total Equity*·.. .. .. .. 62,900