An automobile manufacturer introduces a new car model. Past experience indicates that warranty claims on the new car will probably occur but as the design of the car does not resemble any other models previously on the market, the amount of the warranties cannot be reasonably estimated. Discuss how the manufacturer should record this event in its accounting records, providing evidence to justify your decision. (2 marks) Word limit 100.

Windy Peaks Ltd reported the following information in its financial statements:

	2021	2020
	$	$
Sales Revenue	700,200	650,000
Cost of Sales	422,000	474,500
Net Profit	82,000	58,000
Total Current Assets	161,300	144,400
Total Non-current Assets	440,700	370,800
Total Current Liabilities	75,400	80,100
5 year 10% Debentures	110,600	125,900
Share Capital	340,000	300,000
General Reserve	10,000	10,000
Retained Earnings	175,000	95,000

The company does not have any inventory on hand in 2020 but has total prepaid expenses amounting to $51,400.

Required:

Using the above information calculate the following financial ratios to two decimal places. Provide a formula and show your workings for each ratio.

a) Gross profit margin for 2020 (1 mark)

b) Debt to assets for 2021 (1 mark)

c) Quick Ratio for 2020 (1 mark)

d) Return on Ordinary Shareholders Equity for 2021 (1 mark)