Waterways Continuing Problem 18 The comparative balance sheets of Waterways Corporation's Irrigation Installation Division for the years 2019 and 2020 and the income statements for the year 2019 and 2020 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 CORPORATION-INSTALLATION DIVISION Balance Sheets December 31 Assets 2020 2019 Current assets Cash $840,300 $741,700 Accounts receivable 680,300 544,600 Work in process 704,300 Inventory 16,600 7,600 Prepaid expenses 76,400 42,400 Total current assets 2,317,900 1,336,300 Property, plant, and equipment Land 301,000 301,000 Buildings 451,000 451,000 Equipment 925,300 795,100 Furnishings 40,500 40,500 Accumulated depreciation (486,000) (481,000) Total property, plant, and equipment 1,231,800 1,106,600 Total assets $3,549,700 $2,442,900 Liabilities and Stockholders' Equity Current liabilities Accounts payable $157,300 $128,800 Income taxes payable 100,700 80,100 Wages payable 4,500 2,000 Interest payable 1,200 Other current liabilities 14,300 15,100 Revolving bank loan payable 15,100 Total current liabilities 293,100 226,000 Long-term liabilities Note payable 143,000 Total liabilities 436,100 226,000 Stockholders' equity Common stock 1,250,000 1,250,000 Retained earnings 1,863,600 966,900 Total stockholders' equity 3,113,600 2,216,900 Total liabilities and stockholders' equity $3,549,700 $2,442,900 WATERWAYS CORPORATION-INSTALLATION DIVISION Income Statements For the Year Ending December 31 2020 Sales $5,536,300 $4,917,500 Less: Cost of goods sold 3,124,300 2,835,300 Gross profit 2,412,000 2,082,200 WATERWAYS CORPORATION -INSTALLATION DIVISION Income Statements For the Year Ending December 31 2020 2019 Sales $5,536,300 $4,917,500 Less: Cost of goods sold 3,124,300 2,835,300 Gross profit 2,412,000 2,082,200 Operating expenses Advertising 50,100 48,100 Insurance 400,400 400,400 Salaries and wages 586,400 556,400 Depreciation 78,700 69,700 Other operating expenses 21,200 18,518 Total operating expenses 1,136,800 1,093,118 Income from operations 1,275,200 989,082 Other income Gain on sale of equipment 18,100 Other expenses Interest expense (12,300) Income before income tax 1,281,000 989,082 Income tax expense 384,300 296,725 Net income $896,700 $692,357 CALCULATOR PRINTER VERSION BACK Net income NEXT $896,700 $692,357 (a) Prepare a horizontal analysis of the income statement using 2019 as the base year. (Do not leave any answer field blank. Enter o for amounts. Round percentage values to 1 decimal place, e.g. 52.7%. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) WATERWAYS CORPORATION-INSTALLATION DIVISION Income Statement 2019 Change 2020 $5,536,300 Sales $4,917,500 Less: Cost of goods sold 3,124,300 2,835,300 Gross profit 2,412,000 2,082,200 Operating expenses Advertising 50,100 48,100 Insurance 400,400 400,400 Salaries and wages 586,400 556,400 Depreciation 78,700 69,700 Other operating expenses 21,200 18,518 Total operating expenses 1,136,800 1,093,118 1,275,200 989,082 Income from operations Other income Gain on sale of equipment 18,100 Other expenses Interest expense (12,300) Income before income tax 1,281,000 384,300 989,082 296,725 Income tax expense Net income $896,700 $692,357 CALCULATOR PRINTER VERSION BACK NE (b) Prepare a vertical analysis of the income statement for 2020. (Round percentage values to 1 decimal place, e.g. 52.7%. Enter negative amounts using either a negative sign preceding the number e.g. -45% or parentheses e.g. (45)%) WATERWAYS CORPORATION-INSTALLATION DIVISION Income Statement Amount Percent Sales $5,536,300 Less: Cost of goods sold 3,124,300 Gross profit 2,412,000 Operating expenses Advertising 50,100 Insurance 400,400 Salaries and wages 586,400 Depreciation 78,700 Other operating expenses 21,200 Total operating expenses 1,136,800 Income from operations 1,275,200 Other income Gain on sale of equipment 18,100 Other expenses Interest expense (12,300) Income before income tax 1,281,000 Income tax expense 384,300 Net income $896,700 (c) Calculate the following ratios for 2020 and indicate whether the ratio is a liquidity, solvency, or profitability ratio. (Round Asset turnover ratio, Accounts receivable turnover ratio, Current ratio and Earnings per share to 2 decimal places, e.g. 15.25. Round Average collection period, Debt to assets ratio, Profit margin, Return on assets ratio, Return on common stockholders' equity ratio and Times interest earned ratio to 1 decimal place, e.g. 15.2 or 15.296. Use 365 days for calculation.) Type (1) Asset turnover ratio times (2) Accounts receivable turnover ratio times