Question

Exercise 13-6 Common-size percents LO P2 Simon Company's year-end balance sheets follow. Current Yr 1 Yr Ago 2 Yrs Ago At December 31 Assets Cash Accounts receivable, net Merchandise inventory Prepaid expenses Plant assets, net Total assets Liabilities and Equity Accounts payable Long-term notes payable secured by mortgages on plant assets Common stock, $10 par value Retained earnings Total liabilities and equity $ 28,970 84,802 103,456 9,329 264,452 $ 491,009 $ 34,201 $ 34,921 59,260 47,032 75,958 51,101 9,156 3,998 244,709 219, 248 $ 423,284 $ 356, 300 $ 124,706 $ 70,820 $ 48,443 93,233 163,500 109,570 $ 491,009 96,382 77,955 163,500 163,500 92,582 66,402 $ 423,284 $ 356,300 1. Express the balance sheets in common-size percents. (Do not round intermediate calcul answers to 1 decimal place.) 2. Assuming annual sales have not changed in the last three years, is the change in account assets favorable or unfavorable? 3. Assuming annual sales have not changed in the last three years, is the change in mercha nante finnbin m inunkia

Answer 1

Answer is given below

SIMON COMPANY on-size Comparative Balance Sheet December 31 Current year 1 year ago 2 year ago $28,970 $84,802 $103,456 $9,329 $264,452 $491,009 5.9% 17.3% 21.1% 1.9% 53.9% 100.0% $34,201 $59,260 $75,958 $9,156 $244,709 $423,284 8.1% 14.0% 17.9% 2.2% 57.8% 100.0% $34,921 $47,0321 $51,101 $3,998 $219,248 $356,300 9.8% 13.2% 14.3% 1.1% 61.5% 100.0% Assets Cash Accounts receivable,net Merchandise inventory Prepaid expenses Plant assets, net Total Assets Liabilities and Equity Accounts payable Long-term notes payable secured by mortgage on plant assets Common stock $10 par Retained earnings Total liabilities and equity $124,706 25.4% $70,820 16.7% $48,443 13.6% $93,233 $163,500 $109,570 $491,009 19.0% 33.3% 22.3% 100.0% $96,382 $163,500 $92,582 $423,284 22.8% 38.6% 21.9% 100.0% $77,955 $163,500 $66,402 $356,300 21.9% 45.9% 18.6%| 100.0% 2 Change in Accounts receivable 3 Change in merchandise inventory Unfavourable Unfavourable Explanation Change is unfavourable because if Sales has not changed and Accounts receivable and merchandise inventory have increased it means more money is stuck in Current Assets Average collection period and average days in inventory will increase