Question

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 $ 30,338 87,057 112,741 9,480 269,488 $ 509,104 $ 35,111 $ 37,686 61,444 49,755 81,193 52,994 9,032 4,023 252,103 228,742 $ 438,883 $ 373,200 $ 126,767 $ 73,430 $ 50,740 95.712 163,500 123,125 509,104 103,971 81,652 163,500 163,500 97,982 77,308 $ 438,883 $ 373,200 $ 1. Express the balance sheets in common-size percents (Do not round intermediate calculations and round your final percentage answers to 1 decimal place.) 2. Assuming annual sales have not changed in the last three years, is the change in accounts receivable as a percentage of total assets favorable or unfavorable? 3. Assuming annual sales have not changed in the last three years, is the change in merchandise inventory as a percentage of total assets favorable or unfavorable?

Answer 1

UiMON COMPANY Common Size Companative Balance Sheet as ou 31st decemben. Particulars Current Year I you go yu ago Assets Cash 30338 5.96 35111 18 37686 10.10 Accounts Receivable net 87057 | 17.10 61444 14 49755 13:33 Menchaudise Inventory 112741 22.14 81193 18.50 52994 14.20 Perepaid Expense 9480 1.86 9032 2.06 4023 1.08 Plaut assets net [269488 52.94 252103 57.44 228742 61.29 Total Assets. 509104 100 438883 100 373200 100 Liablities and Equity Accounts Payable 126767 24.90 73430 16 73 50740 13.60 Long Tenure notes Payable secured by 18.90 103971 23.69/81652 21.88 meutgage ou Plaut assets 98712 Commen Stack $10 Pau Valle 163500 32.12 16350 37.25 16500 (43.81 Retaired Eauungs 123125 | 24.18 97982 22:33 77308 20.4 chod Total liability and Guiry 509104 100 439883100 343200 100

92 Change in Account Receivable = "favorable" Since our sales is constant decrease in percentage (i.e. 17.10 to lu to 13.33%) indicates that company is collecting there revenue faster than adding neuo accounts. 03. Huable Change in Merchandise Inventory - favorabo We are observing a decorease in percentage lice. 22.14 to 18. 5 to 14.20) which indicates that it is a sign of inceuased demand which pourts to a higher level of profitability