Question 4 The following financial information is for Priscoll Company. Priscoll Company Balance Sheets December 31 Assets 2020 Cash $ 135,800 Debt investments (short-term) 106,700 Accounts receivable 201,760 Inventory 446,200 Prepaid expenses 48,500 Land 252,200 Building and equipment (net) 504,400 Total assets $1,695,560 Liabilities and Stockholders' Equity Notes payable (short-term) $329,800 Accounts payable 126,100 Accrued liabilities 77,600 Bonds payable, due 2023 485,000 Common stock, $10 par 388,000 Retained earnings 289,060 Total liabilities and stockholders' equity $1,695,560 2019 $ 126,100 77,600 174,600 320,100 44,620 252,200 358,900 $1,354,120 $232,800 100,880 77,600 329,800 388,000 225,040 $1,354,120 2019 Priscoll Company Income Statement For the Years Ended December 31 2020 Sales revenue $1,711,080 Cost of goods sold 1,241,600 Gross profit 469,480 Operating expenses 368,600 Net income $ 100,880 $1,532,600 1,115,500 417,100 323,980 $ 93,120 Additional information: 1. Inventory at the beginning of 2019 was $223,100. 2. Accounts receivable (net) at the beginning of 2019 were $166,840. 3. Total assets at the beginning of 2019 were $1,280,400. 4. No common stock transactions occurred during 2019 or 2020. 5. All sales were on account. Indicate, by using ratios, the change in liquidity and profitability of Priscoll Company from 2019 to 2020. (Round Current ratio, Asset turnover and Earnings per share to 2 decimal places, e.g. 1.65, and all other answers to 1 decimal place, e.g. 6.8 or 6.8%.) 2019 2020 LIQUIDITY Current ratio 1 :1 Accounts receivable turnover times times times times Inventory turnover PROFITABILITY Profit margin % % Asset turnover times times Return on assets % % Earnings per share S $ 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, 2020, and (2) as of December 31, 2021, after giving effect to the situation. (Round debt to assets ratio to 0 decimal places, e.g. 15% and other answers to 1 decimal place, e.g. 6.8 or 6.8%.) Situation Ratio (1) 34,920 shares of common stock were sold at par on July 1, 2021. Net income for 2021 was $104,760. Return on common stockholders' equity (2) All of the notes payable were paid in 2021. All other liabilities remained at their December 31, 2020, levels. At December Debt to assets ratio 31, 2021, total assets were $1,746,000. (3) The market price of common stock was $17 and $23 on December 31, 2020 and 2021, respectively. Net income for Price-earnings ratio 2021 was $104,760. 2020 2021 Return on common stockholders' equity % % Debt to assets ratio % % Price-earnings ratio times times
