Financial information for Dwight Yoakam Company is presented here.

.Additional information: 1. Inventory at the beginning of 2001 was \($350.000\). 2. Receivables at the beginning of 2001 were \($80,000\). 3. Total assets at the beginning of 2001 were \($1,175,000\). 4. No common stock transactions occurred during 2001 or 2002. 5. All sales were on account.

Instructions

(a) Indicate, by using ratios, the change in liquidity and profitability of Dwighl Yoakam Company from 2001 to 2002. [Note: Not all profitability ratios can be computed noi can cash-basis ratios be computed.)

(b) Given below are three independent situations and a ratio that may be affected. For each situation, compute the affected ratio ( 1 ) as of December 31 , 2002, and (2) as of December 31, 2003, after giving effect to the situation. Net income for 2003 was \($125,000\). Total assets on December 31, 2003, were $1,500,000.

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Assets Cash DWIGHT YOAKAM COMPANY Balance Sheets December 31 Short-term investments Receivables (net) Inventories. Prepaid expenses Land Building and equipment (net) Total assets Liabilities and Stockholders' Equity 2002 2001 $ 50,000 $ 42,000 80,000 50,000 100,000 87,000 440,000 300,000 25,000 31,000 75,000 75,000 570,000 400,000 $1,340,000 $985,000 Notes payable $ 125,000 Accounts payable 160,000 $ 25,000 90,000 Accrued liabilities 50,000 50,000 Bonds payable, due 2004 200,000 100,000 Common stock, $5 par 500,000 500,000 Retained earnings 305,000 220,000 Total liabilities and stockholders' equity $1,340,000 $985,000