Question

Exercise 13-5 Suppose the comparative balance sheets of Sage Hill Inc., are presented here. SAGE HILL INC. Condensed Balance Sheet May 31 ($ in millions) 2019 2018 $9,680 2,040 1,490 $13,210 $8,760 1,830 1,640 $12,230 Assets Current Assets Property, plant, and equipment (net) Other assets Total assets Liabilities and Stockholders' Equity Current Liabilities Long-term liabilities Stockholders' equity Total liabilities and stockholders' equity $3,160 1,340 8,710 $3,310 1,370 7,550 $13,210 $12,230

Answer 1

(a) Preparing a Horizontal Analysis of the Balance Sheet data for Sage Hill, Using 2018 as base Year:-

SAGE HILL

Condensed Balance Sheet

May 31

($ in Millions)

	2019	2018	Increase (Decrease)	Percentage Change
Assets:-
Current Assets	$9,680	$8,760	$920	10.5%
Property, Plant and Equipment (net)	2,040	1,830	$210	11.5%
Other Assets	1,490	1,640	($150)	(9.1%)
Total Assets	$13,210	$12,230	$980	8%
Liabilities and Stockholders Equity:-
Current Liabilities	$3,160	$3,310	($150)	(4.5%)
Long-term Liabilities	1,340	1,370	($30)	(2.2%)
Stockholders Equity	8,710	7,550	$1,160	15.4%
Total Liabilities and Stockholders Equity	$13,210	$12,230	$980	8%

Working Notes:-

Calculations for Increase or Decrease:-

Increase or Decrease=(2019 data - 2018 data)

For example:-

Current Assets (Increase or Decrease)=($9,680-$8,760)

=$920

Other Calculations are same as Current Assets.

Calculations for Percentage of Change:-

Percentage of Change={(Increase or Decrease)/base Year}×100

For example:-

Current Assets=($920/$8,760)×100

=10.5%

Other Calculations are same as Current Assets.

(b) Preparing a Vertical Analysis of the Balance Sheet Data for Sage Hill for 2019:-

SAGE HILL

Condensed Balance Sheet

May 31

($ in Millions)

	2019	Percentage
Assets:-
Current Assets	$9,680	73.3%
Property, Plant and Equipment (net)	2,040	15.4%
Other Assets	1,490	11.3%
Total Assets	$13,210	100%
Liabilities and Stockholders Equity:-
Current Liabilities	$3,160	23.9%
Long-term Liabilities	1,340	10.2%
Stockholders Equity	8,710	65.9%
Total Liabilities and Stockholders Equity	$13,210	100%

Working Notes:-

Calculations for Percentage:-

Current Assets=(Current Assets/Total Assets)×100

=($9,680/$13,210)×100

=73.3%

Same as Current Assets other percentages are calculated.