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Calculate all ratios needed to determine if XYZ is possibly underreporting accounts payable. If you detect possible fraud, explain why you think it might exist.

Required ratio calculations:

Acid-test ratio (Quick assets/Current liabilities)

Current ratio (Current assets/Current liabilities)

Accounts payable/Cost of goods sold

Accounts payable/Total liabilities

Accounts payable/Inventory

| CASE 7 CONSOLIDATED BALANCE SHEETS - XYZ COMPANY 20x120x2 20x3 Assets: Current assets $ 1,542 $ 851 $317 Cash and cash equivalents Receivables Inventories Deferred income taxes Total current assets Land 5.602 1,524 851 4,115 1,112 302 $6,380 15,239 8,475 5,008 (305) $ 9,519 22,547 10,982 6,233 (396) 3,329 900 456 $5,002 12,045 7,698 3,511 (235) Buildings Machinery Accumulated depreciation Total assets $48.885 $34,797 $28,021 $ 5,603 786 $ 4,112 543 $ 4,655 $ 4,758 235 $ 4,993 $ 6,389 Liabilities and Stock- holders' Equity Current liabilities Accounts payable Taxes payable Total current liabilities Long-term debt Deferred income taxes Stockholders' Equity Common stock Retained eamings Total liabilities and stockholders' equity 19,546 16,987 845 16,115 562 354 22,220 12,764 2,907 2.444 201 $48 885 $34,797 $28,021 CASE 7 CONSOLIDATED STATEMENTS OF INCOME- XYZ COMPANY 20x3 20x2 20x1 $26,534 18,201 $22.473 18,161 Revenues Cost of goods sold Gross margin Operating expenses $18,739 15,406 $ 3,333 2,965 $ 8,333 5,428 $ 4,312 3,512 $ 2,905 $ 800 $368 Operating income before taxes Income taxes 320 147 1.162 $ 1743 Net income $ 480 $ 221