Summer Corporation has just completed its comparative statements for the year ended December 31, year 5 At this point, certain analytical and interpretive procedures are to be undertaken. The completed statements (summarized) are as follows: Statement of Earnings Year 5 Year 4 Sales revenue $960,000 $840,000 Cost of sales 540,000 460,000 Gross margin 420,000 380,000 Operating expenses (including interest on bonds) 342,000 336,000 Pretax earnings 78,000 44,000 Income tax expense 24,000 12,000 Net earnings $ 54,000 $ 32,000 Statement of Financial Position Cash $ 13,600 $ 7,800 Accounts receivable (net) 84,000 56,000 Merchandise inventory 50,000 40,000 Prepayments 400 200 Property, plant, and equipment (net) 260,000 240,000 $408,000 $344,000 Accounts payable $ 34,000 $ 36,000 Income taxes payable 2,000 4,000 Bonds payable (5% interest rate) 140,000" 100,000 Common shares (40,000 shares) 200,000 200,000 Retained earnings 32,000 4,000 $408,000 $344,000 *Credit alex totalled 40 percent of total sales. $40,000 of bends were and on January 3, year 5. "The market price of the stock at the end of year 5 was $15 per share. "During year 5, the company declared and paid a cash dividend of $35,000.