These financial statement items are for Barfield Corporation at year-end,

These financial statement items are for Barfield Corporation at year-end, July 31,

2014.

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 2017).......... 1,800

Common stock................ 16,000

Cash.................... 29,200

Accounts receivable............. 9,780

Accumulated depreciation—equipment....... 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. Barfield

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 Crescent Equipment. Your sales manager has approached you with a proposal to sell $20,000 of equipment to Barfield. He would like to provide a loan to Barfield in the form of a 10%, 5-year note payable. Evaluate how this loan would change Barfield’s current ratio and debt to assets ratio, and discuss whether you would make the sale.


Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...