P15-4 Financial information for Hanshew Company is presented below.

Price: $2.50


P15-4 Financial information for Hanshew Company is presented below.

Hanshew Company
Balance Sheets
31-Dec
Assets	2009	2008
Cash	70,000	65,000
Short-term investments	52,000	40,000
Receivables (net)	98,000	80,000
Inventory	125,000	135,000
Prepaid expenses	29,000	23,000
Land	130,000	130,000
Building and equipment (net)	180,000	175,000
	684,000	648,000
Liabilities and Stockholders’ Equity
Notes payable	100,000	100,000
Accounts payable	48,000	42,000
Accrued liabilities	50,000	40,000
Bonds payable, due 2010	150,000	150,000
Common stock	200,000	200,000
Retained earnings	136,000	116,000
	684,000	648,000

Hanshew Company
Income Statement
For the Years Ended December 31
Net sales			850,000	790,000
Cost of goods sold			620,000	575,000
Gross profit			230,000	215,000
Operating expenses			187,000	173,000
Net income			43,000	42,000

1. Inventory at the beginning of 2008 was $118,000.
2. Receivables (net) at the beginning of 2008 were $88,000.The allowance for doubtful accounts
was $4,000 at the end of 2009, $3,800 at the end of 2008, and $3,700 at the beginning of 2008.
3. Total assets at the beginning of 2008 were $630,000.
4. No common stock transactions occurred during 2008 or 2009.
5. All sales were on account.

Instructions

(a) Indicate, by using ratios, the change in liquidity and profitability of Hanshew Company from
2008 to 2009. (Note: Not all profitability ratios can 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, 2009, and (2) as of December 31,
2010, after giving effect to the situation. Net income for 2010 was $50,000. Total assets on
December 31, 2010, were $700,000.