### Evaluate the 2011 year-end debt ratio for the business

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##### Reference no: EM133128

Question :

Evaluate net income from equity analysis, preparing a balance sheet, and evaluating the debt ratio

The accounting records of Fabiano Distribution show the subsequent assets and liabilities as of 31st December, 2010 and 2011.

Late in December 2011, the business buys a small office building and land for \$225,000. It paid \$120,000 cash toward the purchase and a \$105,000 note payable was signed for the balance. Mr. Fabiano had to invest \$35,000 cash in the business (in exchange for stock) to enable it to pay the \$120,000 cash. The business also pays \$3,000 cash per month for dividends

Required

1. Generate balance sheets for the business as of 31st December, 2010 and 2011.Hint: Report only net equity on the balance sheet and remember that net equity equals the difference between liabilities and assets.)

2. By comparing equity amounts from the balance sheets and using the given information shown in this problem, purpose a calculation to show how much total income was earned by the business during 2011.

3. Evaluate the 2011 year-end debt ratio for the business

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