d comment on profitability. P15.4 (LO 2) Financial information for Ernie Bishop Company is presented below. Ernie Bishop Company Statements of Financial Position December 31 2020 Assets Land Building and equipment (net) Prepaid expenses Inventory Accounts receivable (net) Short-term investments Cash Total assets 130,000 168,000 29.000 125,000 98,000 52.000 70,000 672,000 2019 130,000 175,000 23,000 135,000 80.000 40.000 65,000 648,000 Equity and Liabilities Share capital-ordinary, 10 par Retained earnings Bonds payable, due 2023 Notes payable (long-term) Accounts payable Accrued liabilities Total equity and liabilities 200,000 130,000 150,000 100.000 48,000 44.000 672,000 200,000 116,000 150,000 100,000 42.000 40.000 648.000 Ernie Bishop Company Income Statement For the Years Ended December 31 Net sales Cost of goods sold Gross profit Operating expenses Net income 2020 858,000 611.000 247,000 204,500 42,500 2019 798.000 575.000 223.000 181,000 42.000 Additional information: 1. Inventory at the beginning of 2019 was 118.000. 2. Total assets at the beginning of 2019 were 632,000. 3. No ordinary share transactions occurred during 2019 or 2000 4. All sales were on account. 5. Accounts receivable (net) at the nts Teceivable (net) at the beginning of 2019 were 88.000, 6. Notes payable are classified as a current liability Instructions a. Indicate, by using ratios, the change in liquidity and profitability of Ernie Bishop Company from 2019 to 2020. (Note: Not all profitability ratios can 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, 2020. and (2) as of December 31, 2021. after giving effect to the situation. Situation Ratio 1. 18,000 ordinary shares were sold Return on ordinary shareholders' at par on July 1, 2021. Net income for equity 2021 was 50,000. 2. All of the notes payable were paid in 2021. Debt to assets ratio The only change in liabilities was that the notes payable were paid. Total assets on December 31, 2021, were 700,000. 3. Market price of ordinary shares was 9 Price-earnings ratio on December 31, 2020, and 12.50 on December 31, 2021. Net income for 2021 was 50,000. Tareet (USA) and Wal-Mart Stores, Inc. (USA) for a recent b. 1. Retur 13.29 Compute din