1. Calculate the 2017 and 2016 liquidity ratios identified using the ratio analysis table below. Also calculate the change and the percentage change for the ratios and complete the table. (Formulas are given to shorten the time spent on the assignment.)

2. Analyze the Chipmunk Company's ratios for both years and compare the figures with the given industry ratios. Based on the ratios identified, where do you think fraud may have occurred?

You are a fraud investigator who has been hired to detect financial statement fraud for the Chipmunk Company. You have been provided with the financial statements on the following pages and are now beginning your analysis of those financial statements. Please note: the balance in inventories on January I, 2016 was $11,427,937.

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CHIPMUNK COMPANY BALANCE SHEET DECEMBER 31, 2017 AND 2016 Assets 2017 2016 Current assets Cash $1,320,096 $1,089,978 Accounts receivable: net (Notes 2 and 5) 1,646,046 1,285,593 Inventories [Notes 1(a), 3, and 5] 13,524,349 12,356,400 Prepaid expenses 17,720 15,826 Deposits 7,916 5,484 Total current assets $16,516,127 $14,753,281 Property, plant, and equipment [Notes 1(b) and 4] at cost, less accumulated depreciation 596,517 612,480 Total Assets $17,112,644 $15,365,761 Liabilities Current liabilities Notes payable-Bank (Note 5) $5,100,000 $4,250,000 Accounts payable 1,750,831 1,403,247 Accrued liabilities 257,800 217,003 Federal income taxes payable 35,284 45,990 Current portion of long-term debt (Note 6) 5,642 5,642 Total current liabilities $7,149,557 $5,921,882 Long-term liabilities Long-term debt (Note 6) 409,824 415,466 Total Liabilities $7,559,381 $6,337,348 Stockholders' Equity Common stock (Note 7) $10,000 $10,000 Additional paid-in capital 2,500,000 2,500,000 Retained earnings 7,043,263 6,518,413 Total stockholders' equity $9,553,263 $9,028,413 Total Liabilities and Stockholders' Equity $17,112,644 $15,365,761