The following financial information is for Vail Company.

Additional information:
1. Inventory at the beginning of 2009 was $115,000.
2. Receivables (net) at the beginning of 2009 were $88,000.
3. Total assets at the beginning of 2009 were $630,000.
4. No common stock transactions occurred during 2009 or 2010.
5. All sales were on account.

Instructions
(a) Indicate, by using ratios, the change in liquidity and profitability of Vail Company from 2009 to 2010.
(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, 2010, and (2) as of December 31, 2011, after giving effect to the situation. Net income for 2011 was $40,000. Total assets on December 31, 2011, were $900,000.
Situation ...........................................................................Ratio
1. 18,000 shares of common stock were ................Return on common stockholders
sold at par on July 1, 2011. .......................................equity
2. All of the notes payable were paid in 2011. .......Debt to total assets
3. The market price of common stock was .............Price-earnings
$9 and $12 on December 31, 2010
and 2011,respectively.

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VAIL COMPANY Balance Sheets December 31 Assets 2010 70,000 65,000 55,000 104,000 230,000 135,000 25,000 23,000 130,000 130,000 260,000 75,000 2009 Short-term nvstments Receivables Inventories Prepaid expenses 40,000 0,000 Building and equipment (net) Total assets $874,000 $648,000 Liabilities and Stockholders' Equit Notes payable Accounts payable Accrued liabilities Bonds payable, due 2009 Common stock, $10 par Retained earnings Total liabilities and stockholders' equity $170,000 $100,000 42,000 40,000 250,000 150,000 200,000 200,000 149,000 116,000 $874,000 $648,000 65,000 40,000 VAIL COMPANY Income Statements For the Years Ended December 31 2010 2009 $880,000 $790,000 Cost of goods sold Gross profit Operating expenses Net income 640,000 575,000 240,000 215,000 190,000 167,000 50,000 48,000 1