TOPIC 4232

Description

Ex. 180

The comparative balance sheet of Nathan Company appears below:

NATHAN COMPANY

Comparative Balance Sheet

December 31,

———————————————————————————————————————————

Assets   2017 2016

Current assets .............................................$   420$333

Plant assets ...............................................     780  567

Total assets ...............................................$1,200$900

Liabilities and stockholders' equity

Current liabilities ...........................................$   168$144

Long-term debt ............................................300162

Common stock .............................................432306

Retained earnings ..........................................     300  288

Total liabilities and stockholders' equity ........................$1,200$900

Instructions

(a)Using horizontal analysis, show the percentage change for each balance sheet item using 2016 as a
base year.

(b)Using vertical analysis, prepare a common size comparative balance sheet.

SOLUTION.
SOL.a Percentage change using horizontal analysis

NATHAN COMPANY

Comparative Balance Sheet

December 31,

        ASSETS:

 Current assets  26% [100% - (420/333 x 100)]

 Plant assets  38% [100% - (780/567 x 100)]

 Total assets  33% [100% - (1,200/900 x 100]

 Liabilities and stockholders' equity:

 Current liabilities  17% [100% - (168/144 x 100)]

 Long-term debt  85% [100% - (300/162 x 100)]

 Common stock  41% [100% - (432/306 x 100)]

 Retained earnings  4%   [100% - (300/288 x 100)]

   Total liabilities and stockholders'

 33% [100% - 1,200/900 x 100]
equity

Kindly note that the percentages are rounded off to the nearest whole numbers.

SOL.b Common size comparative balance sheet.

NATHAN COMPANY

Comparative Balance

Sheet December 31,

      (b)       (b)
        ASSETS:  2017  2016

 Current assets  $420  35% [420/1200 x 100]  $333  37% [333/900 x 100]

 Plant assets  $780  65% [780/1200 x 100]  $567  63% [567/900 x 100]

       Total assets  $1,200  100%  $900  100%

 Liabilities and stockholder's

Equity:

 Current liabilities  $168  14% [168/1200 x 100]  $144  16% [144/900 x 100]

 Long-term debt  $300  25% [300/1200 x 100]  $162  18% [162/900 x 100]

 Common stock  $432  36% [432/1200 x 100]  $306  34% [306/900 x 100]

 Retained earnings  $300  25% [300/1200 x 100]  $288  32% [288/900 x 100]

 $1,200  100%  $900