Les Waruck, Kim Chau, and Leena Manta formed a partnership, WCL Sales, on January 11, 2014, by investing $68,250, $109,200, and $95,550, respectively. The partnership agreement states that incomes and losses are to be shared on the basis of a salary allowance of $40,000 for Waruck, $80,000 for Chau, and $40,000 for Manta, with any remainder shared on the ratio of beginning-of-period capital balance.

Following is the December 31, 2014, adjusted trial balance, in alphabetical order:

Account..................................................................... Balance*

Accounts payable .................................................... 14,000

Accounts receivable ................................................ 46,000

Accumulated amortization, patent.......................... 6,000

Accumulated depreciation, fixtures ......................... 3,000

Accumulated depreciation, furniture....................... 6,000

Allowance for doubtful accounts............................. 1,200

Amortization expense, patent ................................. 2,000

Bad debt expense ................................................... 2,800

Cash....................................................................... 14,000

Depreciation expense, fixtures................................ 3,000

Depreciation expense, furniture .............................. 6,000

Fixtures ................................................................... 31,000

Furniture................................................................. 69,000

Kim Chau, capital ...................................................109,200

Kim Chau, withdrawals ........................................... 14,000

Leena Manta, capital .............................................. 95,550

Leena Manta, withdrawals...................................... 10,000

Les Waruck, capital ................................................. 68,250

Les Waruck, withdrawals......................................... 30,000

Merchandise inventory ........................................... 22,000

Notes payable, due 2017** .................................... 34,000

Patent.................................................................... 20,000

Prepaid rent........................................................... 36,000

Rent expense ..........................................................84,000

Sales....................................................................... 102,000

Sales discounts ....................................................... 3,400

Unearned sales ....................................................... 3,000

Wages expense.......................................................49,000

Required

Prepare the December 31, 2014, classified balance sheet, showing all appropriate supporting calculations.

Analysis Component:

Assuming that the assets of businesses similar to WCL Sales are financed 60% by debt and 40% by equity, does WCL Sales compare favorably or unfavourably to the industry average? What is the relationship between type of financing and risk?