**Exercise: Common-Size Comparative Balance Sheets Analysis**1. **Express the balance sheets in common-size percents.**2. **Analyzing Accounts Receivable:** - Assuming annual sales have not changed in the last three years, evaluate whether the change in accounts receivable as a percentage of total assets is favorable or unfavorable.3. **Analyzing Merchandise Inventory:** - Assuming annual sales have not changed in the last three years, evaluate whether the change in merchandise inventory as a percentage of total assets is favorable or unfavorable.**Instructions:**Complete the analysis by entering your answers in the provided tabs.---### Task: Express the balance sheets in common-size percents*(Note: Do not round intermediate calculations and round your final percentage answers to 1 decimal place.)***SIMON COMPANY** **Common-Size Comparative Balance Sheets** **December 31**| **Assets** | **Current Year** (%) | **1 Year Ago** (%) | **2 Years Ago** (%) ||-----------------------------|----------------------|--------------------|---------------------|| Cash | | | || Accounts receivable, net | | | || Merchandise inventory | | | || Prepaid expenses | | | || Plant assets, net | | | || **Total assets** | | | || **Liabilities and Equity** | **Current Year** (%) | **1 Year Ago** (%) | **2 Years Ago** (%) ||--------------------------------|----------------------|--------------------|---------------------|| Accounts payable | | | || Long-term notes payable | | | || Common stock, $10 par | | | || Retained earnings | | | || **Total liabilities and equity** | | | |### Instructions:- Focus on calculating the percentage of each line item relative to the total assets or total liabilities and equity for each year.- Utilize these percentages to determine the trends over the three-year period and assess their favorability based on the stability or change in sales. **Required Information****Use the following information for the exercises below. (Algo)***[The following information applies to the questions displayed below.]*Simon Company's year-end balance sheets follow.**At December 31**| | Current Year | 1 Year Ago | 2 Years Ago ||---------------------|--------------|------------|-------------|| **Assets** | | | || Cash | $25,693 | $30,032 | $31,284 || Accounts receivable, net | 75,195 | 51,526 | 40,485 || Merchandise inventory | 91,790 | 68,088 | 44,871 || Prepaid expenses | 7,868 | 7,729 | 3,408 || Plant assets, net | 226,383 | 210,667 | 189,752 || **Total assets** | $426,929 | $368,042 | $309,800 || **Liabilities and Equity** | | | || Accounts payable | $106,305 | $60,955 | $40,894 || Long-term notes payable | 81,065 | 86,343 | 66,412 || Common stock, $10 par value| 162,500 | 163,500 | 163,500 || Retained earnings | 77,059 | 57,244 | 38,994 || **Total liabilities and equity** | $426,929 | $368,042 | $309,800 |For both the current year and one year ago, compute the following ratios:

Name: **Exercise: Common-Size Comparative Balance Sheets Analysis**1. **Exp
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Description: **Exercise: Common-Size Comparative Balance Sheets Analysis**1. **Express the balance sheets in common-size percents.**2. **Analyzing Accounts Receivable:** - Assuming annual sales have not changed in the last three years, evaluate whether the cha

Lets understand the basics. Common size comparative statement is a statement which is expressed in form of perecentage. For ex. It express assets, liability, sales and expenses as a form of percentage of one base item. In income statement base figure generally a sales but in the balance sheet items, it is generally a total assets figure. For ex. if we are taking balance sheet into calculation then, Percentage of cash = (Cash in hand/Total assets) * 100 Lets calcualte the requirement. (1) SIMON COMPANY Common - Size Comparative Balance Sheets December 31 Current year 1 Year Ago 2 Year Ago Assets Cash 6.0 % 8.2 % 10.1 % Account receivable, net 17.6 % 14.0 % 13.1 % Merchandise inventory 21.5 % 18.5 % 14.5 % Prepaid expenses 1.8 % 2.1 % 1.1 % Plant assets, net 53.0 % 57.2 % 61.2 % Total assets 100.0 % 100.0 % 100.0 % Liabilities and equity Account payable 24.9 % 16.6 % 13.2 % Long term notes payable 19.0 % 23.5 % 21.4 % Common stock, $10 par 38.1 % 44.4 % 52.8 % Retained earnings 18.0 % 15.6 % 12.6 % Total liabilities and equity 100.0 % 100.0 % 100.0 % (2) Account receivable as a percentage of total asset is not favorable as account receivable is increasing in percentage of total assets which is a sign that entity is not able to collect account receivable efficiently and more of the asset is stuck in account receivable. (3) Inventory as a percentage of total asset is not favorable as inventory is increasing in percentage of total assets which is a sign that entity is not able to rotate its inventory efficiently and more of the asset is stuck in inventory.

Business

Accounting

1. Express the balance sheets in common-size percents. 2. Assuming annual sales have not changed in the last three years, is the change in accounts receivable as a percentage of total assets favorable or unfavorable? 3. Assuming annual sales have not changed in the last three years, is the change in merchandise inventory as a percentage of total assets favorable or unfavorable? Complete this question by entering your answers in the tabs below. Req 1 Req 2 and 3 Express the balance sheets in common-size percents. (Do not round intermediate calculations and round your final percentage answers to 1 decimal place.)

1. Express the balance sheets in common-size percents. 2. Assuming annual sales have not changed in the last three years, is the change in accounts receivable as a percentage of total assets favorable or unfavorable? 3. Assuming annual sales have not changed in the last three years, is the change in merchandise inventory as a percentage of total assets favorable or unfavorable? Complete this question by entering your answers in the tabs below. Req 1 Req 2 and 3 Express the balance sheets in common-size percents. (Do not round intermediate calculations and round your final percentage answers to 1 decimal place.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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