Select a section Select a Study Objective FULL SCREEN PRINTER VERSION 4 BACK NEXT P9-4 The following financial information is for Priscoll Company. PRISCOLL COMPANY Balance Sheets December 31 2017 2016 Assets $ 70,000 $ 65,000 Cash 40,000 Debt investments (short-term) 55,000 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 S170,000 $120,000 Accounts payable 65,000 52,000 40,000 40,000 Accrued liabilities 250.000 170,000 Bonds payable, due 2020 200,000 200,000 Common stock, $10 par 116,000 149,000 Retained earnings $698,000 Total liabilities and stockholders' equity S874,000 BACK NEXT 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 Ratio Situation Situation Ratio Return on 1. 18,000 shares of common stock were sold at par on July 1, 2018. Net income for 2018 was $54,000. 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, ly. Net income for 2018 was $54,000, Price- earnings ratio