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3. PR.14.03B Cost of goods sold (682,500) % (613,600) % Gross profit $617,500 % $566,400 % Selling expenses $(260,000) % (188,800) % Administrative expenses (169,000) % (177,000) % Total operating expenses $(429,000) % $(365,800) % Operating income $188,500 % $200,600 % Other revenue 78,000 % 70,800 % Income before income tax expense $266,500 % $271,400 % Income tax expense (117,000) % (106,200) % Net income $149,500 % $165,200 % 2. The net income as a percent of sales has  . All the costs and expenses, other than selling expenses, have maintained their approximate cost as a percent of sales relationship between 20Y1 and 20Y2. Selling expenses as a percent of sales, however, have  . Apparently, the new advertising campaign  been successful. The increased expense  produced sufficient sales to maintain relative profitability. Thus, selling expenses as a percent of sales have  . Effect of Transactions on Current Position Analysis Data pertaining to the current position of Lucroy Industries Inc. are as follows: Cash $800,000 Marketable securities 550,000 Accounts and notes receivable (net) 850,000 Inventories 700,000 Prepaid expenses 300,000 Accounts payable 1,200,000 Notes payable (short-term) 700,000 Accrued expenses 100,000 Required: 1. Compute (a) the working capital , (b) the current ratio , and (c) the quick ratio . Round ratios to one decimal place. a. Working capital $ b. Current ratio

20Y8 % 20Y7 % 20Y6 % 20Y5 % 20Y4 % c. Times interest earned :

Stargel Inc. Comparative Income Statement For the Years Ended December 31, 20Y2 and 20Y1 20Y2 20Y1 Sales $10,000,000 $9,400,000 Cost of goods sold (5,350,000) (4,950,000) Gross profit $4,650,000 $4,450,000 Selling expenses $(2,000,000) $(1,880,000) Administrative expenses (1,500,000) (1,410,000) Total operating expenses $(3,500,000) $(3,290,000) Operating income $1,150,000 $1,160,000 Other revenue and expense: Other revenue 150,000 140,000 Other expense (interest) (170,000) (150,000) Income before income tax expense $1,130,000 $1,150,000 Income tax expense (230,000) (225,000) Net income $900,000 $925,000 Stargel Inc. Comparative Balance Sheet December 31, 20Y2 and 20Y1 20Y2 20Y1 Assets Current assets: Cash $500,000 $400,000 Marketable securities 1,010,000 1,000,000 Accounts receivable (net) 740,000 510,000 Inventories 1,190,000 950,000 Prepaid expenses 250,000 229,000 Total current assets $3,690,000 $3,089,000 Long-term investments 2,350,000 2,300,000 Property, plant, and equipment (net) 3,740,000 3,366,000 Total assets $9,780,000 $8,755,000 Liabilities Current liabilities $900,000 $880,000 Long-term liabilities: Mortgage note payable, 10% $200,000 $0 Bonds payable, 10% 1,500,000 1,500,000 Total long-term liabilities $1,700,000 $1,500,000 Total liabilities $2,600,000 $2,380,000 Stockholders' Equity Preferred $0.90 stock, $10 par $500,000 $500,000