Problem:
These financial statement items are for Snyder Corporation at year-end, July 31, 2007.
Salaries payable: $ 2,080
Salaries expense: 51,700
Utilities expense: 22,600
Equipment: 18,500
Accounts payable 4,100
Commission revenue: 61,100
Rent revenue: 8,500
Long-term note payable: 1,800
Common stock: 16,000
Cash: 24,200
Accounts receivable: 9,780
Accumulated depreciation 6,000
Dividends: 4,000
Depreciation expense: 4,000
Retained earnings (beginning of the year): $35,200
Instructions:
Question 1: Prepare an income statement and a retained earnings statement for the year. Snyder Corporation did not issue any new stock during the year.
Question 2: Prepare a classified balance sheet at July 31.
Question 3: Compute the current ratio and debt to total assets ratio.
Question 4: Suppose that you are the president of Allied Equipment. Your sales manager has approached you with a proposal to sell $20,000 of equipment to Snyder. He would like to provide a loan to Snyder in the form of a 10%, 5-year note payable. Evaluate how this loan would change Snyder's current ratio and debt to total assets ratio, and discuss whether you would make the sale.