Fundamental Accounting Principles 22th Edition by John Wild ,Ken Shaw,Barbara Chiappetta

Exercise 60

Angel Martin is a young entrepreneur who operates Martin Music Services, offering singing lessons and instruction on musical instruments. Martin wishes to expand but needs a $30,000 loan. The bank requests that Martin prepare a balance sheet and key financial ratios. Martin has not kept formal records but is able to provide the following accounts and their amounts as of December 31, 2015.

Required
1. Prepare a balance sheet as of December 31, 2015, for Martin Music Services. (Report only the total equity amount on the balance sheet.)
2. Compute Martin's debt ratio and its return on assets (the latter ratio is defined in Chapter 1). Assume average assets equal its ending balance.
3. Do you believe the prospects of a $30,000 bank loan are good Why or why not