Granville Sharp established Granville Products Co. as a sole proprietorship on January 5, 2019. At the companys year end of December 31, 2019, the accounts had the following balances: Currents assets, excluding inventory $ 10,000 Other assets (long-term) 107,000 Current liabilities 30,000 Long-term bank loan 50,000 Capital (Owners investment, excluding income) 40,000 Purchases during the year: January 2: 5,000 @ $11 $55,000 June 30: 8,000 @ $12 96,000 December 10: 6,000 @ $16 96,000 Sales $284,000 Other expenses 40,000 A count of ending inventory on December 31, 2019 showed that there were 4,000 units on hand. Granville is now preparing financial statements for the year. He is aware that inventory may be costed using FIFO or weighted average cost (WAC) method. He is unsure of which one to use and asks for your assistance. In discussions with Granville, you learn the following. 1. Suppliers provide goods at regular prices as long as Granville Products current ratio (CR) is at least 2 to 1. If CR is lower, the suppliers increase their price by 10% in order to compensate for what they consider to be a substantial credit risk. 2. The terms of the long-term bank loan include the banks ability to demand immediate repayment of the loan if the debt-to-total-assets ratio (TL/TA) is greater than 45%. 3. Granville thinks that, for the company to be a success, the rate of return on total assets, ROA, calculated as NI/TA, should be at least 30%. 4. Granville has an agreement with the companys only employee, Safa, that for each full percentage point above a 25% ROA, she will be given an additional one day off with pay in the following year. Required: a. Calculate EI under FIFO and WAC. b. Prepare an income statement for 2019 and a year (2019) end B/S under FIFI and WAC. c. Calculate CR, TL/TA, and ROA (NI/TA) under each method. Use the following format for I/I and B/S

Income Statement
	FIFO	WAC
Sales
COGS
GP
other expenses
NI
Balance Sheet
	FIFO	WAC
Current assets excluding inventory
inventory
total current assets
other assets (long term)
Total Assets
Current Liabilities
Long term bank loan
Total Liabilities
Capital including income
Total liabilities and owners equity

d. Evaluate the consequences of these 3 ratios in terms of the constraints and agreements. e. Safa would receive how many days off in 2020 under each method? f. Which method would you recommend and why?