Instructions

In good form (include headings), prepare an income statement, a retained earnings statement, and a classified balance sheet as of December 31, 2020. Then compute the current ratio and the debt-to-total-assets ratios identifying which is a measure of liquidity and which is a measure of solvency.

Accounts payable $ 10,000

Accounts receivable 11,000

Accumulated depreciationequipment 38,000

Advertising expense 21,000

Cash 4,000

Common stock 90,000

Copyright 4,000

Depreciation expense 12,000

Dividends 15,000

Equipment 210,000

Ford Motor Co. stock (long-term investment) 6,000

Insurance expense 3,000

Notes payable (due 2028) 70,000

Prepaid insurance 6,000

Rent expense 17,000

Retained earnings (beginning) 12,000

Salaries and wages expense 34,000

Salaries and wages payable 3,000

Service revenue 130,000

Supplies 4,000

Supplies expense 6,000