E2.9 (LO 1, 2), AP These financial statement items are for Fairview Corporation at year-end, July 31, 2022.

Prepare financial statements.

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 2025)		1,800
Common stock		16,000
Cash		29,200
Accounts receivable		9,780
Accumulated depreciationequipment		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.

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 Fairviews current ratio and debt to assets ratio, and discuss whether you would make the sale.