The comparative balance sheets of Waterways Corporations Irrigation Installation Division for the years 2012 and 2013 and the income statements for the year 2012 and 2013 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 CORPORATIONINSTALLATION DIVISION Balance Sheets December 31 Assets 2012 $ 746,681 542,685 7,500 42,590 1,339,456 300,000 450,000 800,200 40,416 (485,204) 1,105,412 $2,444,868 $ 128,360 79,989 1,984 15,246 225,579 225,579 1,250,000 969,289 2,219,289 $2,444,868 2013 $ 836,797 680,750 702,159 Inventory 16,766 Prepaid expenses 76,550 Total current assets 2,313,022 Property, plant, and equipment Land 300,000 Buildings 450,000 Equipment 929,400 Furnishings 40,416 Waterways Continuing Problem 17 Current assets Cash Accounts receivable Work in process Accumulated depreciation Total property, plant, and equipment Total assets 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 (482,523) 1,237,293 $3,550,315 $ 157,095 101,344 4,517 1,187 14,515 15,000 293,658 140,000 433,658 1,250,000 1,866,657 3,116,657 $3,550,315 18 Waterways Continuing Problem WATERWAYS CORPORATIONINSTALLATION DIVISION Income Statements For the Year Ending December 31 2013 Sales $5,536,077 2012 $4,957,266 2,807,316 2,149,950 48,000 400,000 554,640 62,319 18,476 1,083,435 1,066,515 1,066,515 319,955 746,560 Less: Cost of goods sold Gross profit Operating expenses Advertising Insurance Salaries and wages Depreciation Other operating expenses Total operating expenses Income from operations Other income Gain on sale of equipment Other expenses Interest expense Income before income tax Income tax expense Net income $ 3,132,777 2,403,300 50,000 400,000 584,640 71,319 21,200 1,127,159 1,276,141 18,000 (12,187) 1,281,954 384,586 897,368 $ Instructions (a) Prepare a horizontal analysis of the income statement using (b) Prepare a vertical analysis of the income statement for 2013. (c) Calculate the following ratios for 2013 and indicate whether the ratio is a liquidity, solvency, or profitability ratio. (1) Asset turnover ratio. (2) Receivables turnover ratio. (3) Average collection period. (4) Current ratio. (5) Debt to total assets ratio. (6) Earnings per share. (7) Profit margin rate. (9) Return on assets ratio. (10) Return on common stockholders equity ratio. (11) Times interest earned ratio. (d) Comment on your findings.