Question

Required: 1. Prepare a vertical analysis of Sports Unlimited's 2018 and 2017 balance sheets. Express each amount as a percentage of total assets for that year. (Amounts to be deducted should be indicated by a minus sign. Round your answers to 1 decimal place.) SPORTS UNLIMITED CD Balance Sheets December 31 2018 Amount % 2017 Amount % Assets Current assets: Cash $ Accounts receivable 232,200 91,800 85,500 13,500 136,500 60,000 147,750 6,750 Inventory Prepaid rent Long-term assets: Investment in bonds Land 117,000 206,550 201,150 (47,700) 900,000 246,750 189,000 (36,750) 750,000 $ $ Equipment Less: Accumulated depreciation Total assets Liabilities and Stockholders' Equity Current liabilities: Accounts payable Interest payable Income tax payable Long-term liabilities: Notes payable Stockholders' equity: Common stock Retained earnings Total liabilities and stockholders' equity 75,600 27,000 21,600 104,250 13,500 21,000 263,700 193,500 247,500 264,600 900,000 247,500 170,250 750,000 $ $
please do parts 1 and 2 and show work

Answer 1

Solution:

(1 )Vertical Analysis:

Vertical analysis is also called as Common size analysis. In this method every item of the statement is divided by a common figure, that common figure will be Total of Asset/Lisbilities in case of Balance sheet and Sales in case of Income statement.

For example : Percentage of cash is calculated as

2017= (136500/750000)*100= 18.2%

2018= (232200/900000)*100= 25.8%

Similarly values of all items are calculated. See the attached image

E 18.2 8 19.7 0.9 с D Vertical Analysis of Sports unlimited 2018 2017 3 Items Amounts % Amounts 4 Assets 5 Current Assets: 6 Cash 232200 25.8 136500 7 Accounts Receivable 91800 10.2 60000 8 Inventory 85500 9.5 147750 9 Prepaid 13500 1.5 6750 10 Long term Assets: 11 Investments in bond 117000 13 0 12 Land 206550 22.95 246750 13 Equipment 201150 22.35 189000 14 Less Accumulated Depreciation -47700 -5.3 -36750 15 Total Assets 900000 100 750000 16 Liabilities and Shareholder's Equity 17 Current liabilities: 18 Accounts payable 75600 104250 19 Interests payable 27000 3 13500 20 Income tax payable 21600 2.4 21000 21 Long term liabilities: 22 Notes payable 263700 29.3 193500 23 Stock holders Equity: 24 Common stock 247500 27.5 247500 25 Retained earnings 264600 29.4 170250 26 Total liabilities and Stock holders Equit 900000 100 750000 27 28 0 32.9 25.2 -4.9 100 8.4 13.9 1.8 2.8 25.8 33 22.7 100

(2) Horizontal Analysis:

Horizontal analysis is also called as Comparative analysis. In this method every item of the statement is compared with the previous year statement, to check the increase or decrease in the value of that item, and the difference is divided by the value of last or base year for calculating percentage .

For example: Cash is compared as follows.

2018 Cash 232200

Less : 2017 Cash 136500

Increase in cash 95700

Percentage increase = (95700/136500)*100= 41.21

Similarly values of all items are calculated. See the attached image below.