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To provide a consistent frame of reference for the company's financial statements and ratios, assume that the following balance sheet and income statement reflect the company's pretransaction condition and performance. Fresno Furniture Manufacturing Inc.'s Pretransaction Statement of Financial Condition Cash $15,000 Accounts payable Marketable securities 10,000 Wages payable Accounts receivable 470,000 Taxes payable Inventory 500,000 Notes payable Prepaid expenses 5,000 Total current liabilitie Total current assets 1,000,000 Long-term debt Total liabilities Gross plant and 1,500,000 Common stock equipment Accumulated depreciation 500,000 Capital paid in excess of $20,000 20,000 10,000 50,000 100,000 500,000 600,000 150,000 Fresno Furniture Manufacturing Inc.'s Pretransaction Statement of Financial Performance Sales ,000,000 Less: Cost of goods sold 2,000,000 Gross profit 3,000,000 Less: Operating expenses 600,000 Operang profit (EBIT) 2,400,000 Less: Interest expense? 33,000 Earnings before taxes (EBT) 2,367,000 Less: Tax expense 828,450 Net income $1,538,550 350,000 Net plant and equipment 1,000,000 Retained earnings Total equity Total debt and equity 900,000 1,400,000 $2,000,000 Total assets $2,000,000 Cost of goods sold equals 40% of sales. Interest expense equals 6% of the combined notes payable and long-term debt balances. The average federal and state tax rate is 35%. Indicate if any of the listed financial statement accounts is affected by the following business transactions and whether the listed ratios will increase decrease, or remain unchanged as a result of the transaction. (Hint: Assume that the bene Indicate if any of the listed financial statement accounts is affected by the following business transactions and whether the listed ratios will increase, decrease, or remain unchanged as a result of the transaction. (Hint: Assume that the business transaction occurs exactly as stated without interpreting it further. Do not consider any related transactions that may occur before or after the specified transaction.) Business Transaction 1 common stock (si per share par value) to new and existing shareholders for $20 per share. ET F 2 Fresno Furniture Manufacturing Inc. (FFM) sells 25,0 25 Check if the Account Is Affected by the Specified Transaction Ratio's Behavior Financial Account Operating income Capital paid in excess of US DOO Financial Ratio Debt ratio Basic earnings power Fixed assets turnover Current ratio Inventory turnover Operating profit margin Long-term debt Rets ned earnings Cash Common stock Business Transaction 2 Fresno Furniture Manufacturing Inc. (FFMy's labor force goes on strike for two months, reducing the company's sales by 20.00%. Check if the Account Is Affected by the Specified Transaction Ratio's Behavior Financial Account Financial Ratio Inventory turnover Inventory Operating profit margin Sales 00000 Notes payable Debt ratio Average collection period Current ratio Basic earning power Cross

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