Question

Analysis The balance sheet data of Randolph Company for two recent years appears below. Assets: Year 2 Year 1 Current assets $ 440 $280 Plant assets 675 520 Total assets $1,115 $800 Liabilities and stockholders' equity: Current liabilities $ 280 $120 Long-term debt 250 160 Common stock 325 320 Retained earnings 260 200 Total liabilities and stockholrers' equity $1,115 $800 a. Using horizontal analysis, show the percentage change for each balance sheet item using Year 1 as a base year. b. Using vertical analysis, prepare a comparative balance sheet.

Answer 1

1. Horizontal Analysis Year 2 Year 1 Percentage Change Workings Assets Current assets Plant assets Total assets $ $ $ 440 675 1,115 $ $ $ 280 520 800 57.14% ($ 440 - $ 280) / $ 280 29.81% ($ 675 / $ 520)/$ 520 39.38% (% 1,115 / $ 800) / $ 800 Liabilities and stockholders' equity Current liabilities Long-term debt Common stock Retained earnings Total liabilities and stockholders' equity $ $ $ $ $ 280 $ 250 $ 325 $ 260 $ 1,115 $ 120 160 320 200 800 133.33% ($ 280 - $ 120)/$ 120 56.25% ($ 250 - $ 160) / $ 160 1.56% ($ 325 - $ 320) / $ 320 30.00% ($ 260 - $ 200) / $ 200 39.38%(% 1,115 / $ 800) / $ 800

2. Vertical Analysis Year 2 Year 1 Workings Assets Current assets Plant assets Total assets $ 440 $ 675 $ 1,115 39.46% 60.54% 100.00% $ $ $ 280 520 800 Year 2 Year 1 35.00% ($ 440 / $1,115) * 100 ($ 280 / $ 800) * 100 65.00% ($ 675 / $ 1,115) * 100 ($ 520 / $ 800) * 100 100.00% Liabilities and stockholders' equity Current liabilities Long-term debt Common stock Retained earnings Total liabilities and stockholders' equity $ $ $ $ $ 280 250 325 260 1,115 25.11% $ 22.42% $ 29.15% $ 23.32% $ 100.00% $ 120 160 320 200 800 15.00% ($ 280 / $ 1,115) * 100 ($ 120 / $ 800) * 100 20.00% ($ 250 / $ 1,115) * 100 ($ 160 / $ 800) * 100 40.00% ($ 325 / $ 1,115) * 100 ($ 320 / $ 800) * 100 25.00% ($ 260 / $ 1,115) * 100 ($ 200 / $ 800) * 100 100.00%