Chapter 13, Problem 6E

To determine

Common size balance sheet:

Common size balance sheet is a method of presenting balance sheet in terms of percentage where every account is revealed in form of percentage.

To prepare: Common size balance sheet of S Company.

Explanation of Solution

Common size balance sheet is expressed in form of percentage which helps to analyze the statement in a better way.

Below mentioned is the balance sheet of S Company.

S COMPANY
Common Size Balance Sheet
For the Year Ended December31, 2017, 2016 and 2015
				Common size percents
Particulars	2017($)	2016($)	2015($)	2017	2016	2015
Assets
Cash	31,800	35,625	37,800	6.08	18.01	10.01
Accounts receivable	89,500	62,500	50,200	17.11	14.04	13.3
Merchandise inventory	112,500	82,500	54,000	21.51	18.54	14.30
Prepaid expenses	10,700	9,375	5,000	2.04	2.1	1.32
Plant assets, net	278,500	255,000	230,500	53.25	57.30	61.06
Total assets	523,000	445,000	377,500	100	100	100
Liabilities and Equity
Accounts payable	129,900	75,250	51,250	24.84	16.91	13.58
Long-term notes payable secured by mortgage on plant assets	98,500	101,500	83.500	18.83	22.81	22.12
Common stock	163,500	163,500	163,500	31.26	36.74	43.31
Retained earnings	131,100	104,750	79,250	25.07	23.54	21
Total liabilities and equity	523,000	445,000	377,500	100	100	100
Table (1)

• S Company has maintained suitable amount of cash in the year 2017 as compared to other years. Common size percents of cash are 6.08%, 18.01% and 10.01% in the year 2017, 2016, and 2015.
• Whereas accounts payable of the company has been increased in the year of 2017 to 24.84% as compared to 2016 and 2015.

Hence, S Company tries to work efficiently.

Working Notes:

Formula to calculate common size percent is,

$\text{Common}\text{size}\text{percent}\text{(\%)}=\frac{\text{Analysis}}{\text{Base}\text{amount}}\times 100$

2017

Calculation of common percent of cash,

$\begin{array}{c}\text{Common percent of cash}=\frac{\$31,800}{\$523,000}\times 100\\ =6.08\%\end{array}$

Calculation of common percent of accounts receivables,

$\begin{array}{c}\text{Common percent accounts}\text{receivables}=\frac{\$89,500}{\$523,000}\times 100\\ =17.11\%\end{array}$

Calculation of common percent of merchandise inventory,

$\begin{array}{c}\text{Common percent of}\text{merchandise inventory}=\frac{\$112,500}{\$523,000}\times 100\\ =21.51\%\end{array}$

Calculation of common percent of prepaid expenses,

$\begin{array}{c}\text{Common percent of}\text{prepaid}\text{expenses}=\frac{\$10,700}{\$523,000}\times 100\\ =2.04\%\end{array}$

Calculation of common percent of plant assets,

$\begin{array}{c}\text{Common percent plant}\text{assets}=\frac{\$278,500}{\$523,000}\times 100\\ =53.25\%\end{array}$

Calculation of common percent of total assets,

$\begin{array}{c}\text{Common percent of}\text{total}\text{assets}=\frac{\$523,000}{\$523,000}\times 100\\ =100\%\end{array}$

Calculation of common percent of accounts payable,

$\begin{array}{c}\text{Common percent of}\text{accounts payable}=\frac{\$129,900}{\$523,000}\times 100\\ =24.84\%\end{array}$

Calculation of common percent of long term notes payable,

$\begin{array}{c}\text{Common percent of long}\text{term notes payable}=\frac{\$98,500}{\$523,000}\times 100\\ =18.83\%\end{array}$

2016

Calculation of common percent of cash,

$\begin{array}{c}\text{Common percent of cash}=\frac{\$35,625}{\$445,000}\times 100\\ =8.01\%\end{array}$

Calculation of common percent of accounts receivables,

$\begin{array}{c}\text{Common percent accounts}\text{receivables}=\frac{\$62,500}{\$445,000}\times 100\\ =14.04\%\end{array}$

Calculation of common percent of merchandise inventory,

$\begin{array}{c}\text{Common percent of}\text{merchandise inventory}=\frac{\$82,500}{\$445,000}\times 100\\ =18.54\%\end{array}$

Calculation of common percent of prepaid expenses,

$\begin{array}{c}\text{Common percent of}\text{prepaid}\text{expenses}=\frac{\$9,375}{\$445,000}\times 100\\ =2.1\%\end{array}$

Calculation of common percent of plant assets,

$\begin{array}{c}\text{Common percent plant}\text{assets}=\frac{\$255,000}{\$445,000}\times 100\\ =57.30\%\end{array}$

Calculation of common percent of total assets,

$\begin{array}{c}\text{Common percent of}\text{total}\text{assets}=\frac{\$445,000}{\$445,000}\times 100\\ =100\%\end{array}$

Calculation of common percent of accounts payable,

$\begin{array}{c}\text{Common percent of}\text{accounts payable}=\frac{\$75,250}{\$445,000}\times 100\\ =16.91\%\end{array}$

Calculation of common percent of long term notes payable,

$\begin{array}{c}\text{Common percent of long term notes payable secured}=\frac{\$101,500}{\$445,000}\times 100\\ =22.81\%\end{array}$

Calculation of common percent of common stock,

$\begin{array}{c}\text{Common percent of}\text{common}\text{stock}=\frac{\$163,500}{\$445,000}\times 100\\ =36.74\%\end{array}$

Calculation of common percent of retained earnings,

$\begin{array}{c}\text{Common percent of}\text{retained}\text{earnings}=\frac{\$104,750}{\$445,000}\times 100\\ =23.54\%\end{array}$

Calculation of common percent of total liabilities and equity,

$\begin{array}{c}\text{Common percent of}\text{total}\text{liabilities}\text{and}\text{equity}=\frac{\$445,000}{\$445,000}\times 100\\ =100\%\end{array}$

2015

Calculation of common percent of cash,

$\begin{array}{c}\text{Common percent of cash}=\frac{\$37,800}{\$377,500}\times 100\\ =10.01\%\end{array}$

Calculation of common percent of accounts receivables,

$\begin{array}{c}\text{Common percent accounts}\text{receivables}=\frac{\$50,200}{\$377,500}\times 100\\ =13.3\%\end{array}$

Calculation of common percent of merchandise inventory,

$\begin{array}{c}\text{Common percent of}\text{merchandise inventory}=\frac{\$54,000}{\$377,500}\times 100\\ =14.30\%\end{array}$

Calculation of common percent of prepaid expenses,

$\begin{array}{c}\text{Common percent of}\text{prepaid}\text{expenses}=\frac{\$5,000}{\$377,500}\times 100\\ =1.32\%\end{array}$

Calculation of common percent of plant assets,

$\begin{array}{c}\text{Common percent plant}\text{assets}=\frac{\$230,500}{\$377,500}\times 100\\ \text{}=61.06\%\end{array}$

Calculation of common percent of total assets,

$\begin{array}{c}\text{Common percent of}\text{total}\text{assets}=\frac{\$377,500}{\$377,500}\times 100\\ =100\%\end{array}$

Calculation of common percent of accounts payable,

$\begin{array}{c}\text{Common percent of}\text{accounts payable}=\frac{\$51,250}{\$377,500}\times 100\\ =13.58\%\end{array}$

Calculation of common percent of long term notes payable,

$\begin{array}{c}\text{Common percent of long term notes payable secured}=\frac{\$83,500}{\$377,500}\times 100\\ =22.12\%\end{array}$

Calculation of common percent of common stock,

$\begin{array}{c}\text{Common percent of}\text{common}\text{stock}=\frac{\$163,500}{\$377,500}\times 100\\ =43.31\%\end{array}$

Calculation of common percent of retained earnings,

$\begin{array}{c}\text{Common percent of}\text{retained}\text{earnings}=\frac{\$79,250}{\$377,500}\times 100\\ =21\%\end{array}$

Calculation of common percent of total liabilities and equity,

$\begin{array}{c}\text{Common percent of total}\text{liabilities}\text{and}\text{equity}=\frac{\$377,500}{\$377,500}\times 100\\ =100\%\end{array}$