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1.	Compute Northtown's current ratio, debt ratio, and earnings per share. Round all ratios to two decimal places.
2.	Compute the three ratios after evaluating the effect of each transaction that follows. Consider each transaction separately.
	a.	Borrowed $105,000 on a long-term note payable.
	b.	On January 1, Issued $30,000 shares of common stock, receiving cash of $367,000.
	c.	Paid short-term notes payable $24,000.
	d.	Purchased merchandise of $45,000 on account, debiting Inventory.
	e.	Received cash on account $23,000.

Cash. $ 21,000 Accounts Payable. $ 100,000

Short-term investments. 33,000 Accrued liabilities.. 31,000

Accounts receivable, net.. 86,000 Long-term notes payable 166,000

Inventories. 144,000 Other long-term liabilities.. 31,000

Prepaid expenses 3,000 Net income.. 94,000

Total assets.. 672,000 Number of common

Short-term notes payable.. 45,000 shares outstanding. 48,000

Requirement 1. Compute

Northtown'sNorthtown's

current ratio, debt ratio, and earnings per share. Round all ratios to two decimal places.

Start by determining the formula for each ratio, beginning with the current ratio, followed by the debt ratio, and then earnings per share.

/

=

Current ratio

/

=

Debt ratio

(

-

) /

=

Earnings per share

Now compute

Northtown'sNorthtown's

current ratio, debt ratio, and earnings per share. (Round all ratios to two decimal places.)

	Current ratio	Debt ratio	Earnings per share

Requirement 2. Compute the three ratios after evaluating the effect of each transaction that follows. Consider each transaction

separately.

(Round all ratios to two decimal places.)

	Current ratio	Debt ratio	Earnings per share
a.

b.

c.

d.

e.

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