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

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Chapter 17 Solutions
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