The following financial information is for Cheaney Company.

Additional information:1. Inventory at the beginning of 2011 was $115,000.2. Receivables (net) at the beginning of 2011 were $86,000.3. Total assets at the beginning of 2011 were $660,000.4. No common stock transactions occurred during 2011 or 2012.5. All sales were on account.Instructions(a) Indicate, by using ratios, the change in liquidity and profitability of Cheaney Company from 2011 to 2012. (Note: Not all profitability ratios can be computed nor can cashbasis ratios be computed.)(b) Given below are three independent situations and a ratio that may be affected. For each situation, compute the affected ratio (1) as of December 31, 2012, and (2) as of December 31, 2013, after giving effect to the situation. Net income for 2013 was $54,000. Total assets on December 31, 2013, were $900,000.

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CHEANEY COMPANY Balance Sheets December 31 2011 Assets 2012 $ 70,000 $ 65,000 40,000 90,000 165,000 Cash Short-term investments Receivables 55,000 104,000 Inventories 230,000 Prepaid expenses Land 25,000 23,000 130,000 130,000 Building and equipment (net) 260,000 185,000 Total assets $874,000 $698,000 Liabilities and Stockholders' Equity Notes payable Accounts payable Accrued liabilities Bonds payable, due 2015 Common stock, $10 par Retained earnings $170,000 65,000 40,000 $120,000 52,000 40,000 170,000 200,000 116,000 250,000 200,000 149,000 Total liabilities and stockholders' equity $874,000 $698,000 CHEANEY COMPANY Income Statements For the Years Ended December 31 2012 2011 Sales $882,000 $790,000 575,000 Cost of goods sold 640,000 Gross profit Operating expenses 242,000 190,000 215,000 167,000 $ 52,000 $ 48,000 Net income