Question

Simon Company's year-end balance sheets follow. Current Yr 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 $ 28,758 81,700 101,685 8,986 261,477 $ 482,606 1 Yr Ago 2 Yrs Ago $ 33,283 $ 33,980 59,411 47,137 78,507 49,231 8,475 3,737 236,364 212,615 $ 416,840 $ 346,700 $ 70,311 $ 45,764 $ 121,371 89,823 163,500 107,912 $ 482,606 92,819 75,088 163,500 163,500 89,410 62,348 $ 416,040 $ 346,700 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 percenta 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? neware in the tabs below

Answer 1

Solution

Simon Company
Common Size Comparative balance Sheet
december 31st , 2015-2017
	Current year	1 Year ago	2 Years ago
Assets
Cash	6.0%	8.0%	9.8%
Accounts Receivables , net	16.9%	14.3%	13.6%
Merchandise Inventory	21.1%	18.9%	14.2%
Prepaid Expenses	1.9%	2.0%	1.1%
Plant Assets ,Net	54.2%	56.8%	61.3%
Total Assets	100.0%	100.0%	100.0%
Liabilities and Equity
Accounts Payable	25.1%	16.9%	13.2%
Long Term Notes Payable Secured by mortgage on plant assets	18.6%	22.3%	21.7%
Common Stock $10 Par	33.9%	39.3%	47.2%
Retained Earnings	22.4%	21.5%	18.0%
Total Liabilities and Equity	100.0%	100.0%	100.0%

.

Change in accounts receivable	Favorable
Change in merchandise inventory	Favorable