a.) Korman Ltd. has asked for your help in comparing the company's profit performance and financial position with the computer services industry average. The manager has given you the company's income statement and balance sheet, and also the following industry average data for computer services companies:

Korman Ltd.
Income Statement
For the Year Ended December 31, 2020
		Industry
	Korman Ltd.	Average
Net sales	$427,000	100.00%
Cost of goods sold	251,000	53.2
Gross margin	176,000	46.8
Operating expenses	89,000	21.3
Operating income	87,000	25.5
Other expenses	22,000	5.2
Net income	$65,000	20.30%

Korman Ltd.
Balance Sheet
31-Dec-20
		Industry
	Korman Ltd.	Average
Current assets	$171,000	62.50%
Property and equip., net	94,000	35.2
Other assets	6,300	2.3
Total assets	$271,300	100.00%
Current liabilities	$118,000	42.50%
Long-term liabilities	68,000	32.5
Shareholders' equity	85,300	25
Total liabilities and shareholders' equity	$271,300	100.00%

1.	Make a two-column common-size income statement and a two-column common-size balance sheet for Korman Ltd. The first column of each statement should present Korman Ltd.'s common-size statement, and the second column should show the industry averages.
2.	For the profitability analysis, compare each of Korman Ltd.'s (a) ratio of gross margin to net sales, (b) ratio of operating income to net sales, and (c) ratio of net income to net sales. Compare these figures to the industry averages. Is Korman Ltd.'s profit performance better or worse than the industry average?
3.	For the analysis of financial position, compare each of Korman Ltd.'s (a) ratio of current assets to total assets, and (b) ratio of shareholders' equity to total assets to the industry averages. Is Korman Ltd.'s financial position better or worse than the industry averages?

b.) Financial statement data of MKRDealer Supplies Ltd. include the following items:

Cash	$68,000		Accounts payable	$109,500
Accounts receivable, net	97,500		Accrued liabilities	27,000
Inventories	129,000		Long-term liabilities	204,000
Prepaid expenses	6,000		Net income	108,000
Total assets	625,000		Number of common shares
Short-term notes payable	39,000		outstanding	40,000	shares

Required

1.	Compute MKRDealer Supplies Ltd.'s current ratio, debt ratio, and earnings per share.
2.	Compute each of the three ratios after evaluating the effect of each transaction that follows. Consider each transaction separately.
	a.	Purchased merchandise of $43,000 on account, debiting Inventory.
	b.	Paid long-term liabilities, $40,000.
	c.	Declared, but did not pay, a $60,000 cash dividend on common shares.
	d.	Borrowed $50,000 on a long-term note payable.
	e.	Issued 10,000 common shares at the beginning of the year, receiving cash of $140,000.
	f.	Received cash on account, $29,000.
	g.	Paid short-term notes payable, $25,000.