he following financial information is for Priscoll Company.

PRISCOLL COMPANY Balance Sheets December 31
Assets	2017	2016
Cash	$ 70,000	$ 65,000
Debt investments (short-term)	55,000	40,000
Accounts receivable	104,000	90,000
Inventory	230,000	165,000
Prepaid expenses	25,000	23,000
Land	130,000	130,000
Building and equipment (net)	260,000	185,000
Total assets	$874,000	$698,000
Liabilities and Stockholders' Equity
Notes payable	$170,000	$120,000
Accounts payable	65,000	52,000
Accrued liabilities	40,000	40,000
Bonds payable, due 2020	250,000	170,000
Common stock, $10 par	200,000	200,000
Retained earnings	149,000	116,000
Total liabilities and stockholders' equity	$874,000	$698,000

PRISCOLL COMPANY Income Statements For the Years Ended December 31
	2017	2016
Sales revenue	$882,000	$790,000
Cost of goods sold	640,000	575,000
Gross profit	242,000	215,000
Operating expenses	190,000	167,000
Net income	$ 52,000	$ 48,000

Additional information:

• 1.Inventory at the beginning of 2016 was $115,000.
• 2.Accounts receivable (net) at the beginning of 2016 were $86,000.
• 3.Total assets at the beginning of 2016 were $660,000.
• 4.No common stock transactions occurred during 2016 or 2017.
• 5.All sales were on account.

Instructions

(a)

Indicate, by using ratios, the change in liquidity and profitability of Priscoll Company from 2016 to 2017. (Note: Not all profitability ratios can be computed nor can cash-basis ratios be computed.)

(b)The following are three independent situations and a ratio that may be affected. For each situation, compute the affected ratio (1) as of December 31, 2017, and (2) as of December 31, 2018, after giving effect to the situation. Net income for 2018 was $54,000. Total assets on December 31, 2018, were $900,000.

Situation	Ratio
1. 18,000 shares of common stock were sold at par on July 1, 2018. Net income for 2018 was $54,000.	Return on common stockholders' equity
2. All of the notes payable were paid in 2018. All other liabilities remained at the same levels as at December 31, 2018. At December 31, 2018, total assets were $900,000.	Debt to assets ratio
3. The market price of common stock was $9 and $12 on December 31, 2017 and 2018, respectively. Net income for 2018 was $54,000.	Price-earnings ratio