The following financial statements and additional information are reported. Comparative Balance Sheets At December 31 Year 2 Year 1 Assets Cash $ 102,100 $ 53,000 Accounts receivable, net 78,500 60,000 Inventory 72,800 100,000 Prepaid expenses 5,300 7,200 Total current assets 258,700 220,200 Machinery 133,000 124,000 Accumulated depreciationMachinery (31,500) (13,500) Total assets $ 360,200 $ 330,700 Liabilities Accounts payable $ 34,000 $ 43,500 Salaries payable 6,900 16,800 Income taxes payable 4,300 5,600 Total current liabilities 45,200 65,900 Notes payable (long term) 39,000 69,000 Total liabilities 84,200 134,900 Equity Common stock, no par value 238,000 169,000 Retained earnings 38,000 26,800 Total liabilities and equity $ 360,200 $ 330,700

\begin{tabular}{|c|c|c|} \hline ComparativeBalanceAtDecember31 & SheetsYear2 & Year 1 \\ \hline \multicolumn{3}{|l|}{ Assets } \\ \hline Cash & $102,100 & $53,000 \\ \hline Accounts receivable, net & 78,500 & 60,000 \\ \hline Inventory & 72,800 & 100,000 \\ \hline Prepaid expenses & 5,300 & 7,200 \\ \hline Total current assets & 258,700 & 220,200 \\ \hline Machinery & 133,000 & 124,000 \\ \hline Accumulated depreciation-Machinery & (31,500) & (13,500) \\ \hline Total assets & $360,200 & $330,700 \\ \hline \multicolumn{3}{|l|}{ Liabilities } \\ \hline Accounts payable & $34,000 & $43,500 \\ \hline Salaries payable & 6,900 & 16,800 \\ \hline Income taxes payable & 4,300 & 5,600 \\ \hline Total current liabilities & 45,200 & 65,900 \\ \hline Notes payable (long term) & 39,000 & 69,000 \\ \hline Total liabilities & 84,200 & 134,900 \\ \hline \multicolumn{3}{|l|}{ Equity } \\ \hline Common stock, no par value & 238,000 & 169,000 \\ \hline Retained earnings & 38,000 & 26,800 \\ \hline Total liabilities and equity & $360,200 & $330,700 \\ \hline \end{tabular} \begin{tabular}{lr} \multicolumn{1}{c}{ For Year Ended December 31, Year 2 } \\ Sales & $723,000 \\ Cost of goods sold & 420,000 \\ Gross profit & 303,000 \\ Operating expenses (excluding depreciation) & 76,000 \\ Depreciation expense & 67,600 \\ \cline { 2 - 2 } Other gains (losses) & 159,400 \\ Gain on sale of machinery & 2,900 \\ Income before taxes & 162,300 \\ Income taxes expense & 44,790 \\ Net income & $117,510 \\ \hline \end{tabular} Additional Information a. A$30,000 note payable is retired at its $30,000 carrying (book) value in exchange for cash. b. The only changes affecting retained earnings are net income and cash dividends paid. c. New machinery is acquired for $66,600 cash. d. Received cash for the sale of machinery that had cost $57,600, yielding a $2,900 gain. e. Prepaid Expenses and Salaries Payable relate to Operating Expenses on the income statement. f. All purchases and sales of inventory are on credit. (2) Compute the company's cash flow on total assets ratio for Year 2