The accounting records of Trinity Co. show the following assets and liabilities as of December 31, 2008, and 2009.

Late in December 2009, the business purchased a small office building and land for $234,666. It paid $120,000 cash toward the purchase and a $114,666 note payable was signed for the balance. Ms. Trinity, the owner, had to invest an additional $35,000 cash (in exchange for stock) to enable it to pay the $120,000 cash toward the purchase. The business also pays $4,000 cash per month in dividends.

Required

1. Prepare balance sheets for the business as of December 31, 2008, and 2009. (Hint: Report only total equity on the balance sheet and remember that total equity equals the difference between assets and liabilities.)

2. By comparing equity amounts from the balance sheets and using the additional information presented in the problem, prepare a calculation to show how much net income was earned by the business during 2009.

3. Calculate the December 31, 2009, debt ratio for the business.