These financial statement items are for Delta Corporation at year-end, July 31, 2020. SHOW YOUR WORK. 

Salaries and wages payable $ 2,080

Salaries and wages expense 57,500

Supplies expense 17,600

Equipment 15,900

Accounts payable 4,100

Service revenue 66,000

Rent revenue 8,000

Notes payable (due in 2020) 1,800

Common stock 16,000

Cash 26,200

Accounts receivable 11,780

Accumulated depreciation—equipment 6,000

Dividends 4,000

Depreciation expense 4,000

Retained earnings (beginning of the year) 33,000

 Instructions

(a) Prepare an income statement and a retained earnings statement for the year. Delta 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 Alfa Equipment. Your sales manager has approached you with a proposal to sell $20,000 of equipment to Delta. He would like to provide a loan to Delta in the form of a 10%, 5-year note payable. Evaluate how this loan would change Delta’s current ratio and debt to assets ratio and discuss whether you would make the sale.