Financial statement data of ABC Fencing, Inc. include the following items:

Cash .................... $ 21,000

Short-Term Investments .......... 25,000

Accounts Receivable, Net .......... 102,000

Inventory ................ 121,000

Prepaid Expenses .............. 15,000

Total Assets ................ 660,500

Short-Term Notes Payable .......... 45,000

Accounts Payable .............. 106,000

Accrued Liabilities ............... 44,000

Long-Term Notes Payable .......... 160,000

Other Long-Term Liabilities .......... 37,000

Net Income ................. 77,000

Number of Common Shares Outstanding ....37,000 shares

Requirements

1. Compute ABC Fencing’s current ratio, debt ratio, and earnings per share. Assume that the company had no preferred shares outstanding. Round all ratios to two decimal places.

2. Compute each of the same three ratios after evaluating the effect of each transaction that follows:

a. Purchased merchandise of $40,000 on account, debiting Inventory.

b. Issued 2,000 common shares, receiving cash of $78,000.

c. Borrowed $78,000 on a long-term note payable.

d. Received cash on account, $18,000.