Ernest runs an art gallery. He organizes exhibitions at which painters and sculptors show their work. If a piece of artwork is sold, Ernest takes a commission of 50% of the selling price. He banks the...

Ernest runs an art gallery. He organizes exhibitions at which painters and sculptors show their work. If a piece of artwork is sold, Ernest takes a commission of 50% of the selling price. He banks the cash and then pays out what is due to the artists. He held a successful exhibition in November, and is planning the next one for January. Each time he holds an exhibition he pays for advertising and sending out leaflets to people on his mailing list, also for wine and soft drinks on the opening night of the exhibition. Putting on the exhibition in January will cost him around £4000.

Ernest has the following assets and liabilities at 31 December:

1 Prepare Ernest’s statement of financial position at 31 December.

2 Write a brief assessment of Ernest’s business position as shown by the statement of financial position.