(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, 2022, and (2) as of December 31, 2023, after giving effect to the situation. (Round Debt to assets ratio to 0 decimal places, e.g. 15 and round all other answers to 1 decimal place, e.g. 15.5. Round % change to O decimal places, for e.g. 1% and if % change is a decrease show the numbers as negative, e.g. -1% or (1%).) Ratio 1. Situation 18,000 shares of common stock were sold at par on July 1, 2023. Net income for 2023 was $55,000. All of the notes payable were paid in 2023. All other liabilities remained at their December 31, 2022 levels. Total assets on December 31, 2023, were $906,000. The market price of common stock was $9 and $13 on December 31, 2022 and 2023, respectively. Return on common stockholders' equity Debt to assets ratio 2. 3. Price-earnings ratio 2022 2023 % Change Return on % % % common stockholders equity Debt to assets ratio Price earnings ratio % % % times times % BLOSSOM COMPANY Income Statements For the Years Ended December 31 2022 2021 Sales revenue Cost of goods sold Gross profit Operating expenses Net income $899,000 647,000 252,000 195,000 $ 57,000 $788,000 574,000 214,000 159,000 $ 55,000 Additional information: 1. 2. 3. Inventory at the beginning of 2021 was $117,000. Accounts receivable (net) at the beginning of 2021 were $88,000. Total assets at the beginning of 2021 were $631,000. No common stock transactions occurred during 2021 or 2022. All sales were on account. 4. 5. The following financial information is for Blossom Company. BLOSSOM COMPANY Balance Sheets December 31 Assets 2022 2021 $ 72,000 52,000 110,000 234,000 24,000 131,000 260,000 $883,000 $ 69,000 41,000 92,000 166,000 23,000 131,000 187,000 $709,000 Cash Debt investments (short-term) Accounts receivable Inventory Prepaid expenses Land Building and equipment (net) Total assets Liabilities and Stockholders' Equity Notes payable Accounts payable Accrued liabilities Bonds payable, due 2025 Common stock, $10 par Retained earnings Total liabilities and stockholders' equity $169,000 64,000 42,000 252,000 205,000 151,000 $883,000 $108,000 54,000 42,000 171,000 205,000 129,000 $709,000 (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, 2022, and (2) as of December 31, 2023, after giving effect to the situation. (Round Debt to assets ratio to 0 decimal places, e.g. 15 and round all other answers to 1 decimal place, e.g. 15.5. Round % change to O decimal places, for e.g. 1% and if % change is a decrease show the numbers as negative, e.g. -1% or (1%).) Ratio 1. Situation 18,000 shares of common stock were sold at par on July 1, 2023. Net income for 2023 was $55,000. All of the notes payable were paid in 2023. All other liabilities remained at their December 31, 2022 levels. Total assets on December 31, 2023, were $906,000. The market price of common stock was $9 and $13 on December 31, 2022 and 2023, respectively. Return on common stockholders' equity Debt to assets ratio 2. 3. Price-earnings ratio 2022 2023 % Change Return on % % % common stockholders equity Debt to assets ratio Price earnings ratio % % % times times % BLOSSOM COMPANY Income Statements For the Years Ended December 31 2022 2021 Sales revenue Cost of goods sold Gross profit Operating expenses Net income $899,000 647,000 252,000 195,000 $ 57,000 $788,000 574,000 214,000 159,000 $ 55,000 Additional information: 1. 2. 3. Inventory at the beginning of 2021 was $117,000. Accounts receivable (net) at the beginning of 2021 were $88,000. Total assets at the beginning of 2021 were $631,000. No common stock transactions occurred during 2021 or 2022. All sales were on account. 4. 5. The following financial information is for Blossom Company. BLOSSOM COMPANY Balance Sheets December 31 Assets 2022 2021 $ 72,000 52,000 110,000 234,000 24,000 131,000 260,000 $883,000 $ 69,000 41,000 92,000 166,000 23,000 131,000 187,000 $709,000 Cash Debt investments (short-term) Accounts receivable Inventory Prepaid expenses Land Building and equipment (net) Total assets Liabilities and Stockholders' Equity Notes payable Accounts payable Accrued liabilities Bonds payable, due 2025 Common stock, $10 par Retained earnings Total liabilities and stockholders' equity $169,000 64,000 42,000 252,000 205,000 151,000 $883,000 $108,000 54,000 42,000 171,000 205,000 129,000 $709,000
