2. Egan Co reports the following current assets, current liabilities, and noncurrent assets in 2010 and 2009:

Current Assets	2010	2009		Current Liabilities	2010	2009
Cash	500	800		Accounts payable	1,100	700
Marketable securities	700	600		Customer advances	1,900	1,800
Prepaid expenses	1,400	1,300		Short term debt	1,000	700
Inventory	1,700	1,650		Current portion of LT debt	600	800
Noncurrent Assets
Land	210	210		Notes: 1. The company uses LIFO for inventory. Ending inventory using FIFO was $2,400 and $2,200 in 2010 and 2009 respectively. 2. Sales revenue was at $16,300 in 2010 and $16,100 in 2009. 3. Depreciation expense was $420 in 2010 and $390 in 2009. 4. The company made an acquisition in 2010. The book value of the tangible assets purchased was $250, while the fair value was $450. The value of liabilities acquired was $300.
Building	4,150	3,940
Less Acc depn	(1,700)	(1,340)
Net PP&E	2,660	2,810
Completed technology	1,000	800
- acc amortization	(530)	(320)
Net completed tech	470	480
Goodwill	1,400	700

Required

1. (6 points) An analyst draws the following conclusions about the company, based on the given information. In each case indicate if the inference is valid and briefly explain the basis for your answer. Provide calculations to support your answer where necessary.

TRUE OR FALSE?

a. The demand for the companys product is declining.

___________ Briefly explain

b. The fair value of building increased in 2010 because of rising real estate prices.

___________ Briefly explain

c. The companys building is aging and will need to be replaced soon.

___________ Briefly explain

d. The company sold some noncurrent assets during 2010.

___________ Briefly explain

e. The company experienced rising input prices for its raw materials and other manufacturing inputs.

___________ Briefly explain

f. Of the amount the company spent on research this year, $200 was spent on developing technology that was demonstrated to be commercially feasible.

___________ Briefly explain

2. (2 points) What was the purchase price paid by Egan for the acquisition it made in 2010? Show computations.

3. (2 points) Assume that the asset completed technology should have been impaired (to $0) at the end of 2010, but this was not done. Assume also that there is no related tax benefit from impairment. What was the effect (in dollars) of this omission on (a) net income (b) total assets (c) retained earnings and (d) operating cash flow? (Indicate whether overstated/understated/correctly stated and the amount.)

(a) total assets _________________ $______________

(b) retained earnings _________________ $______________

(c) net income _________________ $______________

(d) operating cash flow _________________ $______________