Problem - The accounting records of Faviana Shipping shoe the following assets and liabilities as of December 31, 2008, and 2009.

December 31 2008 2009

Cash $47,867 $8,154

Accounts receivable 25,983 20,370

Office supplies 4,098 3,002

Office equipment 125,816 134,018

Trucks 49,236 58,236

Building 0 164,124

Land 0 40,956

Accounts payable 68,310 33,879

Note payable 0 85,080

Late in December 2009, the business purchased a small office building and land for $205,080. It paid $120,000 cash toward the purchase and an $85,080 note payable was signed for the balance. Ms. Faviana had to invest $34,000 cash in the business (in exchange for stock) to enable it to pay the $120,000 cash. The business also pays $2,400 cash pe month for the 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 the 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 this problem, prepare a calculation to show how much net income was earned by the business during 2009.

3. Compare the 2009 year-end debt ratio for the business.