. Do you think Palisade Creek has adequate liquidity and solvency? Explain and show computational proof! Hint: to adequately answer this question you will need to refer to the end of Chapter 4 and compute Working Capital and the Current Ratio (show your work).

2. Is Palisades profitable? Explain and use numbers from the financial statements.

3. Would you invest in this company? Explain.

Palisade Creek Co. Income Statement For the Year Ended May 31, 20Y6 Sales $ $ 5,316,205 Cost of goods sold 2,991,950 Gross profit $ 2,324,255 Operating Expenses: Selling expenses: Sales salaries expense $ $ 727,800 Advertising expense 292,000 Depreciation expense 14,000 Store supplies expense 9,800 Miscellaneous selling expense 12,600 Total selling expenses $ $ 1,056,200 Administrative expenses: Office salaries expense $$ 41,700 X Rent expense 88,700 Insurance expense 12,000 Miscellaneous administrative expense 7,800 Total administrative expenses 526,200 Total operating expenses 1,582,400 Net income $$ 741,855 Palisade Creek Co. Statement of Stockholders' Equity For the Year Ended May 31, 20Y6 Common Stock Retained Earnings Total Balances, June 1, 2045 $ $ 90,000 $$ 585,300 $ $ 675,300 Issued common stock $ 10,000 $ 10,000 Net income $ 741,855 S $ 741,855 Dividends 135,000 13,500 X Balances, May 31, 2046 $$ 100,000 $$ 1,192,155 $$ 1,292,155 Palisade Creek Co. Balance Sheet May 31, 2046 Assets Current assets: Cash $$ 84,500 Accounts receivable 245,875 Inventory 570,000 Estimated returns inventory 50,200 Prepaid insurance 4,800 Store supplies 4,000 Total current assets 959,375 Property, plant, and equipment: Store equipment 596,500 X Accumulated depreciation-store equipment 70,700 Total property, plant, and equipment 498,800 Total assets $ $ 1,458,175 Liabilities Current liabilities: Accounts payable 63,150 Salaries payable 13,600 Customers refunds payable 89,270 Total liabilities $ $ 166,020 Stockholders' Equity Common stock 100,000 Retained earnings 1,192,155 Total stockholders' equity $ 1,292,155 Total liabilities and Stockholders' Equity $ $ 1,458,175