Question

! Required information Exercise 12-4B Prepare vertical and horizontal analyses (L012-1, 12-2) The following information applies to the questions displayed below.] The balance sheets for Company A for Year 2 and Year 1 are presented below. Exercise 12-4B Part 2 2. Prepare a horizontal analysis for Year 2 using Year 1 as the base year. (Decreases should be indicated by a minus sign. Round your percentage answers to 1 decimal place.) COMPANY A Balance Sheet December 31 Year Increase (Decrease) Year 2 Year 1 Amount Assets 500,000 800,000 1,200,000 8,280,000 Cash 1,692,000 Accounts receivable 1,164,000 Inventory Buildings Less: Accumulated depreciation 2,424,000 8.280,000 (780,000) (1,560,000) S 10,000,000 S 12,000,000 Total assets Liabilities and Stockholders' Equity 1,000,000 1,128,000 Accounts payable $ 1,176,000 Contingent liability 5,520,000 5,520,000 Common stock 3,480,000 4,176,000 Retained earnings $ 12,000,000 $10,000,000 Total liabilities and stockholders' equity

Answer 1

The horizontal analysis will be done in the following manner:

Company A
Balance Sheet
Dec-31
	Year		Increase/Decrease
	Yea 2	Year 1	Amount	%
ASSETS
Cash	1692000	500000	1192000	238%
Accounts Receivables	1164000	800000	364000	46%
Inventory	2424000	1200000	1224000	102%
Buildings	8280000	8280000	0	0%
Less: Accumulated Depreciation	-1560000	-780000	-780000	100%
TOTAL ASSETS	12000000	10000000	2000000	20%
LIABILITIES & STOCKHOLDERS' EQUITY
Accounts Payable	1128000	1000000	128000	13%
Contingent Liability	1176000	0	1176000	0%
Common Stock	5520000	5520000	0	0%
Retained Earnings	4176000	3480000	696000	20%
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY	12000000	10000000	2000000	20%

Notes

The formulae used to prepare horizontal analysis are:

Increase/Decrease in $ = Current Year - Base Year

Increase/Decrease in % = Increase/Decrease in $/Base Year

The workings are attached below:

Balance Sheet Dec 31 Year Year 1 Increase/Decrease Amount % Yea 2 99 ASSETS 100 Cash 101 Accounts Receivables 102 Inventory 103 Buildings 104 Less: Accumulated Depreciation 105 TOTAL ASSETS 106 LIABILITIES & STOCKHOLDERS' EQUITY 107 Accounts Payable 108 Contingent Liability 109 Common Stock 110 Retained Earnings 111 TOTAL LIABILITIES & STOCKHOLDERS' EQUITY 1692000 500000 =B100-C100 =D100/C100 1164000 800000 =B101-C101 =D101/C101 2424000 1200000 =B102-C102 =D102/C102 8280000 8280000 =B103-C103 =D103/C103 - 1560000 - 780000 =B104-C104 =D104/C104 =SUM(B100:B104) =SUM(C100:C104) =B105-C105 =D105/C105 1128000 1176000 5520000 4176000 SUM(B107:B110) 1000000 =B107-C107 =D107/0107 =B108-C1080 5520000 =B109-C109 =D109/C109 3480000 =B110-C110 =D110/C110 SUM(C107:C110) =B111-C111 =D111/C111

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