Question

The balance sheet data of Randolph Company for two recent years appears below: Assets: Year 2...

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 stockholders' equity $1,115 $800 Using horizontal analysis, show the percentage change for each balance sheet item using Year 1 as a base year. Using vertical analysis, prepare a comparative balance sheet.

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Answer #1
Ans.1 Randolph Company
Horizontal Analysis of Balance Sheet
Change in
Year2 Year1 Dollars Percentage (%)
Assets:
Current assets 440 280 160 57.14%
Plant assets 675 520 155 29.81%
Total assets 1115 800 315 39.38%
Liabilities and Stockholders' equity:
Current liabilities 280 120 160 133.33%
Long-term debt 250 160 90 56.25%
Common stock 325 320 5 1.56%
Retained earnings 260 200 60 30.00%
Total liabilities and stockholders' equity 1115 800 315 39.38%
*Change in dollars   =   Particular amount of year 2 - Particular amount of year 1
(eg. = change in current assets = 440 - 280 = 160)
*Change in percentage = Change in dollar / Particular amount of Year1 * 100
(eg.   =   Percentage change in current assets = 160 / 280 * 100 = 57.14%
Ans.2 Randolph Company
Vertical Analysis of Balance Sheet
Year2 Percentage (%) Year1 Percentage (%)
Assets:
Current assets 440 39.46% 280 35.00%
Plant assets 675 60.54% 520 65.00%
Total assets 1115 100.00% 800 100.00%
Liabilities and Stockholders' equity:
Current liabilities 280 25.11% 120 15.00%
Long-term debt 250 22.42% 160 20.00%
Common stock 325 29.15% 320 40.00%
Retained earnings 260 23.32% 200 25.00%
Total liabilities and stockholders' equity 1115 100.00% 800 100.00%
Percentage of year 2 =   Particular amont of year 2 / Total assets * 100
(eg.    Percentage of current assets = 440 / 1115 * 100 = 39.46%)
Percentage of year 1 =   Particular amont of year 1 / Total assets * 100
(eg.    Percentage of current assets = 280 / 800 * 100 = 35%)
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