Concept explainers
Requirement-1
To Calculate:
The Common Size percentages for the given balance sheets
The Common Size percentages for the given balance sheets are as follows:
Simon Company | ||||
Common Size | ||||
Current Year (%) | 1 Year ago (%) | 2 Years ago (%) | ||
ASSETS: | ||||
Cash | 6.1% | 8.0% | 10.0% | |
17.1% | 14.0% | 13.3% | ||
Merchandise Inventory | 21.5% | 18.5% | 14.3% | |
Prepaid Expenses | 2.0% | 2.1% | 1.3% | |
Plant assets, net | 53.3% | 57.3% | 61.1% | |
TOTAL ASSETS | 100.0% | 100.0% | 100.0% | |
LIABILITIES AND EQUITY: | ||||
Accounts Payable | 24.8% | 16.9% | 13.6% | |
Long Term Notes Payable | 18.8% | 22.8% | 22.1% | |
Common Stock, $78 par value | 31.3% | 36.7% | 43.3% | |
25.1% | 23.5% | 21.0% | ||
TOTAL LIABILITIES AND EQUITY | 100.0% | 100.0% | 100.0% |
The Common Size percentages for the given balance sheets are calculated as follows:
Simon Company | ||||||
Common Size Balance Sheet | ||||||
Current Year ($) | Current Year (%) | 1 Year ago ($) | 1 Year ago (%) | 2 Years ago ($) | 2 Years ago (%) | |
A | B = A / 523000 | C | D = C/445000 | C | D = C/377500 | |
ASSETS: | ||||||
Cash | 31,800 | 6.1% | 35,625 | 8.0% | 37,800 | 10.0% |
Accounts Receivable, net | 89,500 | 17.1% | 62,500 | 14.0% | 50,200 | 13.3% |
Merchandise Inventory | 112,500 | 21.5% | 82,500 | 18.5% | 54,000 | 14.3% |
Prepaid Expenses | 10,700 | 2.0% | 9,375 | 2.1% | 5,000 | 1.3% |
Plant assets, net | 278,500 | 53.3% | 255,000 | 57.3% | 230,500 | 61.1% |
TOTAL ASSETS | 523,000 | 100.0% | 445,000 | 100.0% | 377,500 | 100.0% |
LIABILITIES AND EQUITY: | ||||||
Accounts Payable | 129,900 | 24.8% | 75,250 | 16.9% | 51,250 | 13.6% |
Long Term Notes Payable | 98,500 | 18.8% | 101,500 | 22.8% | 83,500 | 22.1% |
Common Stock, $78 par value | 163,500 | 31.3% | 163,500 | 36.7% | 163,500 | 43.3% |
Retained Earnings | 131,100 | 25.1% | 104,750 | 23.5% | 79,250 | 21.0% |
TOTAL LIABILITIES AND EQUITY | 523,000 | 100.0% | 445,000 | 100.0% | 377,500 | 100.0% |
Concept Introduction:
Common Size Financial Statement:
Common Size Analysis is prepared as % format which shows readymade analysis for the financial statements. For the Income statement the common size format shows all the amounts as a % of sales revenue and for the Balance sheet the common size format shows the each items of the balance sheet as a % of the Total assets amount.
Requirement-2
To identify:
If the change in the Accounts Receivable is favorable and unfavorable
Requirement-3
To identify:
If the change in the Merchandise Inventory as % of Total Assets is favorable and unfavorable

Want to see the full answer?
Check out a sample textbook solution
Chapter 17 Solutions
FUNDAMENTAL ACCT PRINCIPLES LL W CONNECT
- You are the partner-in-charge of a large metropolitan office of a regional public accounting firm. Two members of your professional staff have come to you to discuss problems that may affect the firm's independence. Neither of these situations has been specifically answered by the AICPA Professional Ethics Division. Case 1: Don Moore, a partner in the firm, has recently moved into a condominium that he shares with his girlfriend, Joan Scott. Moore owns the condominium and pays all the expenses relating to its maintenance. Otherwise, the two are self-supporting. Scott is a stockbroker, and recently she has started acquiring shares in one of the audit clients of this office of the public accounting firm. The shares are held in Scott's name. At present, the shares are not material in relation to her net worth. 1. What arguments would indicating that the firm's independence has not been impaired? 2. What arguments would indicating that the firm's independence has been impaired? 3. Which…arrow_forwardExamine the importance of proper evaluation of investment projects.arrow_forwardAndretti Company has a single product called a Dak. The company normally produces and sells 60,000 Daks each year at a selling price of $32 per unit. The company’s unit costs at this level of activity are given below: Direct materials $ 10.00 Direct labor 4.50 Variable manufacturing overhead 2.30 Fixed manufacturing overhead 5.00 ($300,000 total)Variable selling expenses 1.20 Fixed selling expenses 3.50 ($210,000 total)Total cost per unit $ 26.50 The company has 1,000 Daks on hand with some irregularities that make it impossible to sell them at the normal price through regular distribution channels. What unit cost figure is relevant for setting a minimum selling price to liquidate these units?arrow_forward
- The financial manager at Rico Ltd had to choose between these two projects, alpha and beta, which have the following net cash inflows: Year Alpha Beta 1 5,000 36,000 2 18,500 36,500 3 36,200 37,000 4 123,000 175,000 Each project requires an initial investment of 118,000. No scrap values are forecast. Required:1. Calculate the payback period for each project. Answers must be expressed in years and months. Which project should be chosen and why? 2. Calculate the Net Present Value (NPV) for each project, using a discount rate of 12%. Which project would you choose and why? 3. Calculate the internal Rate of Return for each project. Which project should be chosen and Why?arrow_forwardCritically evaluate the strengths and limitations of the Capital Asset Pricing Model.arrow_forward1. Provide a brief history of the tax system in Jamaica, highlighting the different types of taxes used in the country. 2. Identify and discuss at least 6 problems with the Jamaican tax system and then provide recommendations to alleviate the problems.arrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education





