Question

Simon Company's year-end balance sheets follow Current Yr 1 Yr Ago 2 Yrs Ago $ 29,700 $ 35,790 $ 35, 461 91,403 63,258 46, 799 112,690 81,10950,344 9,959 9,489 4,141 275,200 257,726 228,755 $518,952 $447,372 $365,500 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 $127,927 $ 73,338 $ 49,211 96,587 102,896 81,583 163,500 163,500 163,500 130,938 107,638 71,206 $518,952 $447,372 $365,500 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? Complete this question by entering your answers in the tabs below. Reg 1 Req 2 and 3 Express the balance sheets in common-size percents. (Do not round Intermediate calculations and round your final percentage answers to 1 decimal place.) SIMON COMPANY Common-Size Comparative Balance Sheets December 31 Current 1 Year 2 Years Year Ago Ago 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 Retained earnings Total abilities and equity

Answer 1

Ans. 1	SIMON   COMPANY
	Common Size Comparative Balance Sheets
	December 31, 2015 - 2017
		Current Year		1 Year Ago		2 Years Ago
	Assets:	Amount	%	Amount	%	Amount	%
	Cash	$29,700	5.72%	$35,790	8.00%	$35,461	9.70%
	Accounts receivables	$91,403	17.61%	$63,258	14.14%	$46,799	12.80%
	Merchandise inventory	$112,690	21.71%	$81,109	18.13%	$50,344	13.77%
	Prepaid expenses	$9,959	1.92%	$9,489	2.12%	$4,141	1.13%
	Plant assets, net	$275,200	53.03%	$257,726	57.61%	$228,755	62.59%
	Total assets	$518,952	100.00%	$447,372	100.00%	$365,500	100.00%
	Liabilities and Equity:
	Accounts payable	$127,927	31.98%	$73,338	18.33%	$49,211	12.30%
	Long term notes payable	$96,587	18.61%	$102,896	23.00%	$81,583	22.32%
	Common stock	$163,500	31.51%	$163,500	36.55%	$163,500	44.73%
	Retained earnings	$130,938	25.23%	$107,638	24.06%	$71,206	19.48%
	Total Liabilities and Equity	$518,952	100.00%	$447,372	100.00%	$365,500	100.00%
	*Calculations for Common Size Balance Sheet:
	Amount is percentage from assets side =   Particular amount from assets side / Total assets * 100
	Amount is percentage from liabilities side =   Particular amount from liability side / Total liabilities and owner's equity * 100
Ans. 2	Unfavorable
	Increase in accounts receivable means business will get it's money in longer time.
	If the money will be back in longer time then it will adversely impact the cash flow of business.
Ans. 3	Favorable
	Increase in inventory is good for business.. If inventory increases then the gross profit & net profit also increases.