Question 2 The comparative balance sheets of Waterways Corporation's Irrigation Installation Division for the years 2019 and 2020 and the income statements for the year 2019 and 2020 are presented below. Additional information: 85% of the sales for Waterways were credit sales. There are 5,000 shares outstanding for both years. This is a private corporation whose shares are not available to the public WATERWAYS CORPORATION-INSTALLATION DIVISION Balance Sheets December 31 Assets 2020 2019 Current assets Cash $830,400 $749,500 Accounts receivable 674.900 541,300 Work in process 708,600 Inventory 16,700 7.500 Prepaid expenses 76,100 42,200 Total current assets 2,306,700 1,340,300 Property, plant, and equipment Land 297.000 297,000 Bulidings 451.000 451,000 Equipment 920,600 792.100 Furnishings 40,200 40,200 Accumulated depreciation (479,600) (485,400) Total property, plant, and equipment 1,230,200 1,094,900 Total assets $3,536,900 $2,435,200 Liabilities and Stockholders' Equity Current liabilities Accounts payable $155.900 $129,200 Income taxes payable 101,600 29,400 Wages payable 4,600 2.000 Interest payable 1,200 Other current liabilities 14,700 15,400 Revolving bank loan payable 15.200 Total current liables 225.000 Long-term liabilities JARA WATERWAYS CORPORATION-INSTALLATION DIVISION Balance Sheets December 31 Assets 2020 2019 Current assets Cash $830,400 $749,500 Accounts receivable 674,900 541,100 Work in process 708,600 Inventory 16,700 7,500 Prepaid expenses 76,100 42,200 Total current assets 2,306,700 1,340,300 Property, plant, and equipment Land 297,000 297,000 Buildings 451,000 451,000 Equipment 920,600 792,100 Furnishings 40,200 40,200 Accumulated depreciation (478,600) (485,400) Total property, plant, and equipment 1,230,200 1,094,900 Total assets $3,536,900 $2,435,200 Liabilities and Stockholders' Equity Current liabilities Accounts payable $155,900 $129,200 Income taxes payable 101,600 79,400 Wages payable 4,600 2,000 Interest payable 1,200 Other current liabilities 14,700 15,400 Revolving bank loan payable 15,200 Total current liabilities 293,200 226,000 Long-term liabilities Novable 140.000 $129,200 79,400 2,000 Liabilities and Stockholders' Equity Current liabilities Accounts payable Income taxes payable Wages payable Interest payable Other current liabilities Revolving bank loan payable Total current liabilities Long-term liabilities Note payable Total liabilities Stockholders' equity Common stock Retained earnings Total stockholders' equity Total liabilities and stockholders' equity $ 155,900 101,600 4,600 1,200 14,700 15,200 293,200 15,400 226,000 140,000 433,200 226,000 1,250,000 1,853,700 3,103,700 $3,536,900 1,250,000 959,200 2,209,200 $2,435,200 WATERWAYS CORPORATION-INSTALLATION DIVISION Income Statements For the Year Ending December 31 2020 2019 Sales $5,497,457 $4,992,500 Less: Cost of goods sold 3,104,300 2,787,500 Gross profit 2,393,157 2,205,000 Operating expenses Advertising 49,500 47,500 Insurance 398,000 398,000 Salaries and wages 584,000 554,000 Depreciation 67,800 58,800 Other operating expenses 21,400 18,588 Total operating expenses 1,120,700 1,076,888 Income from operations 1,272,457 1,128,112 Other income Gain on sale of equipment 17,700 Other expenses s WATERWAYS CORPORATION-INSTALLATION DIVISION Income Statements For the Year Ending December 31 2020 2019 Sales $5,497,457 $4,992,500 Less: Cost of goods sold 3,104,300 2,787,500 Gross profit 2,393,157 2,205,000 Operating expenses Advertising 49,500 47,500 Insurance 398,000 398,000 Salaries and wages 584,000 554,000 Depreciation 67,800 58,800 Other operating expenses 21,400 18,588 Total operating expenses 1,120,700 1,076,888 Income from operations 1,272,457 1,128,112 Other income Gain on sale of equipment 17,700 Other expenses Interest expense (12,300) Income before income tax 1,277,857 1,128,112 Income tax expense 383,357 338,434 Net income $894,500 $789,678 (a) Prepare a horizontal analysis of the income statement using 2019 as the base year. (Do not leave any answer field blank. Enter o for an place, c.9. 52.7%. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45) WATERWAYS CORPORATION-INSTALLATION DIVISION Income Statement 2020 Change Percent 2019 $4,992,500 Sales $5,497,457 % Less: Cost of goods sold 3,104,300 2,787,500 % Gross profit 2,393,157 2,205,000 % WATERWAYS CORPORATION-INSTALLATION DIVISION Income Statement 2020 2019 Change Percent Sales $5,497,457 $4,992,500 % $ Less: Cost of goods sold 3,104,300 2,787,500 % Gross profit 2,393,157 2,205,000 % Operating expenses Advertising 49,500 47,500 % Insurance 398,000 398,000 % Salaries and wages 584,000 554,000 % Depreciation 67,800 58,800 % Other operating expenses 21,400 18,588 % Total operating expenses 1,120,700 1,076,888 % Income from operations 1,272,457 1,128,112 % Other Income Gain on sale of equipment 17,700 % Other expenses Interest expense (12,300) % Income before income tax 1,277,857 1,128,112 % Income tax expense 383,357 338,434 % Net income $894,500 $789,678 $ % WATERWAYS CORPORATION-INSTALLATION DIVISION Income Statement Amount Percent Sales $5,497,457 % Less: Cost of goods sold 3,104,300 % Gross profit 2,393,157 % Operating expenses Advertising 49,500 % Insurance 398,000 % Salaries and wages 584,000 % Depreciation 67,800 % Other operating expenses 21,400 % Total operating expenses 1,120,700 % Income from operations 1,272,457 % Other income Gain on sale of equipment 17,700 % Other expenses Interest expense (12,300) % Income before income tax 1,277,857 Income tax expense 383,357 % Net income $894,500 % Calculate the following ratios for 2020 and indicate whether the ratio is a liquidity, solvency, or profitability ratio. (Round Asset turnover ratio and Earnings per share to 2 decimal places, e.g. 15.25. Round Average collection period, Debt to assets ratio, Profit marg stockholders' equity ratio and Times interest earned ratio to 1 decimal place, e.g. 15.2 or 15.2%. Use 365 days for calculation Type (1) Asset turnover ratio times (2) Accounts receivable turnover ratio times (3) Average collection period days > (4) Current ratio 1 (5) Debt to assets ratio % (6) Earnings per share $ (9) Return on common stockholders' equity ratio (10) Times interest earned ratio times (d) Comment on your findings. Liquidity The company's liquidity is Solvency The company's solvency is very Profitability. The company's profitability is Overall : By all measures the company appears to be both financially Click if you would like to Show Work for this question: Open Show Work