Question

Balance sheet data for Alvarez Company on December 31, the end of two recent fiscal years, follows: Current Previous Year Year Current assets $263,030 $163,200 Property, plant, and 535,130 455,600 equipment Intangible assets 108,840 61,200 Current liabilities 172,330 95,200 Long-term liabilities 353,730 265,200 Common stock 108,840 102,000 Retained earnings 272,100 217,600 Prepare a comparative balance sheet for both years, stating each asset as a percent of total assets and each liability and stockholders' equity Alvaraz Company Comparative Balance Sheet For the Years Ended December 31 Current Current Previous Previous year year year year Amount Percent Amount Percent Current assets $263,030 $163,200 Property, plant, and equipment 535,130 455,600 Intangible assets 108,840 61,200 Total assets $907,000 $680,000 Current liabilities $172,330 $95,200 Long-term liabilities 353,730 265,200 Common stock 108,840 102,000 Retained earnings 272,100 217,600 Total liabilities and stockholders' equity $907,000 $680,000

Answer 1

Comparative Balance Sheet
For the years ended December 31
	Current year amount	Current year percent	Previous year amount	Previous year percent
Current assets	263030	29%	163200	24%
Property, plant, and equipment	535130	59%	455600	67%
Intangible assets	108840	12%	61200	9%
Total assets	907000	100%	680000	100%
Current liabilities	172330	19%	95200	14%
Long-term liabilities	353730	39%	265200	39%
Common stock	108840	12%	102000	15%
Retained earnings	272100	30%	217600	32%
Total liabilities and stockholders’ equity	907000	100%	680000	100%

a
Winthrop Company
Comparative Income Statement
For the Years Ended December 31
	Current	Previous	Increase	Increase
	year	year	(Decrease)	(Decrease)
	Amount	Amount	Amount	Percent
Sales	348000	290000	58000	20.0%
Cost of goods sold	295000	250000	45000	18.0%
Gross profit	53000	40000	13000	32.5%
Selling expenses	14300	13000	1300	10.0%
Administrative expenses	12980	11000	1980	18.0%
Total operating expenses	27280	24000	3280	13.7%
Income before income tax	25720	16000	9720	60.8%
Income tax expense	10300	6400	3900	60.9%
Net income	15420	9600	5820	60.6%
b
The net income for Winthrop Company increased between years. This increase was the combined result of an increase in sales and lower percentage increase in cost of goods sold. The cost of goods sold increased at a slower rate than the increase in sales, thus causing the percentage increase in gross profit to be greater than the percentage increase in sales.