Question

Common-Size Balance Sheets and Horizontal Analysis Comparative balance sheets for Farinet Company for the past two years are as follows: Cash Accounts receivable Inventory Prepaid rent Total current assets Land Plant and equipment Accumulated depreciation Total long-term assets Total assets Accounts payable Income taxes payable Short-term notes payable Total current liabilities Bonds payable Common stock Retained earnings Total stockholders' equity Total liabilities and stockholders' equity December 31 2017 2016 $16,510 $19,500 40,700 30,470 29,860 49,390 18,300 12,390 $105,370 $111,750 $149,430 $149,430 799,110 599,160 129,460 60,630 $819,080 $687,960 $924,450 $799,710 $24,360 $20,930 6,610 10,010 70,580 50,270 $101,550 $81,210 $150,880 $199,510 $400,930 $300,110 271,090 $672,020 $518,990 $924,450 $799,710 218,880 Check My Work 2 more Check My Work uses remaining

Answer 1

Requirement 1 - Prepare Common-Size Comparative Balance Sheets for the two years. Particulars Farinet Company Common-Size Comparative Balance Sheets December 31, 2017 and 2016 December 31, 2017 December 31, 2017 December 31, 2016 December 31, 2016 % % 16,510 1.8% 19,500 2.4% 40,700 4.4% 30,470 3.8% 29,860 3.2% 49,390 6.2% 18,300 2.0% 12,390 1.5% 1,05,370 11.4% 1,11,750 14.0% ($) A A A A Cash Accounts Receivables Inventory Prepaid Rent Total Current Assets A A A A A A A A A A Land Plant and Equipment Accumulated Depreciation Total Long-term Assets 1,49,430 7,99,110 -1,29,460 8,19,080 16.2% 86.4% -14.0% 88.6% 1,49,430 5,99,160 -60,630 6,87,960 18.7% 74.9% -7.6% 86.0% A A A A Total Assets 9,24,450 100.0% A 7,99,710 100.0% A A A A A Accounts Payable Income taxes Payable Short-term Notes Payables Total Current Liabilities 24,360 6,610 70,580 1,01,550 2.6% 0.7% 7.6% 11.0% 20,930 10,010 50,270 81,210 2.6% 1.3% 6.3% 10.2% A A A A Bonds Payable 1,50,880 16.3% 1,99,510 24.9% A A A A Common Stock Retained Earnings Total Stockholders' Equity 4,00,930 2,71,090 6,72,020 43.4% 29.3% 72.7% A 37.5% 27.4% 64.9% 3,00,110 2,18,880 5,18,990 A A A Total Liabilities and Stockholders' Equity 9,24,450 100.0% A $ 7,99,710 100.0%

Requirement 2 - Based on the common-size analysis, it can be concluded that Farinet experienced all of these changes from 2016 to 2017, except c. Current Assets as a percentage of Total Assets Increased. It can be seen that the Current Assets as a percentage of Total Assets has been decreased from 14% in 2016 to 11.4% in 2017. Therefore, the statement is in correct.

Requirement 3 - Prepare comparative balance sheets, including the columns fro the Increase / Decrease in Dollars and in Percentage. Farinet Company Comparative Balance Sheets December 31, 2017 and 2016 December 31, 2017 December 31, 2016 Increase / Decrease Increase / Decrease Particulars ($) ($) % Cash 16,510 $ 19,500 -2,990 -15% Accounts Receivables 40,700 30,470 10,230 34% Inventory 29,860 $ 49,390 $ -19,530 -40% Prepaid Rent 18,300 $ 12,390 $ 5,910 48% Total Current Assets 1,05,370 1,11,750 -6,380 -6% ($) A A A A A A A A to A A to A $ Land Plant and Equipment Accumulated Depreciation Total Long-term Assets $ A A A A 1,49,430 7,99,110 -1,29,460 8,19,080 1,49,430 5,99,160 -60,630 6,87,960 0% 33% 114% 19% A 1,99,950 -68,830 1,31,120 A A A Total Assets A 9,24,450 $ 7,99,710 1,24,740 16% A A A Accounts Payable Income taxes Payable Short-term Notes Payables Total Current Liabilities A A A A 24,360 6,610 70,580 1,01,550 hinth 20,930 10,010 50,270 81,210 3,430 -3,400 20,310 20,340 16% -34% 40% 25% A A Bonds Payable 1,50,880 $ 1,99,510 $ -48,630 -24% A $ Common Stock Retained Earnings Total Stockholders' Equity toto 4,00,930 2,71,090 6,72,020 3,00,110 2,18,880 5,18,990 $ $ $ 1,00,820 52,210 1,53,030 34% 24% 29% A Total Liabilities and Stockholders' Equity $ 9,24,450 $ 7,99,710 $ 1,24,740 16%

Requirement - 4: Identify the five items on the balance sheet that experienced the largest change from one year to next. Item Inventory Prepaid Rent Short-term Notes Payable Plant and Equipment, Accumulated Depreciation Accounts Receivable