Reference no: EM13859234

Problem 1:

1. Using the following balance sheet, prepare a common size balance sheet:

Assets                                                         Liabilities and stockholders' equity

Current assets                                            Current liabilities

Cash                              4                           Accounts payable          28

Short-term investments   9                         Current portion of

Accounts receivable       32                         long-term debt               12      

Inventory                       41               Total current liabilities            40

Prepaid expenses           2                 Long-term liabilities

Deferred taxes, current  7                           Long-term debt              48

Total current assets                 95               Total liabilities                        88                                                     

Long-term assets                                        Stockholders' equity

Property & equipment   53                         Common stock and PIC 51              

Goodwill                             12                         Retained earnings          30

Long-term investments  8                          

Other assets                             1                 Total stockholders' equity       81                                           

Total assets                              169             Total liabilities and equity        169

Problem 2 :

Using the following information prepare a common size income statement:

Net sales                                           $9,500

Cost of goods sold                                        5,900

Gross profit                                                $3,600

General and administrative expenses         1,250

Selling expenses                                920

Operating profit                                $1,430

Income tax expense                           460

Net profit                                          $970