Question

# Simon Company's year-end balance sheets follow. At December 31 Current Yr 1 Yr Ago 2 Yrs...

Simon Company's year-end balance sheets follow.

 At December 31 Current Yr 1 Yr Ago 2 Yrs Ago Assets Cash \$ 31,253 \$ 35,468 \$ 35,156 Accounts receivable, net 87,943 60,828 46,401 Merchandise inventory 109,466 80,380 49,407 Prepaid expenses 10,065 9,031 3,867 Plant assets, net 275,562 257,646 223,869 Total assets \$ 514,289 \$ 443,353 \$ 358,700 Liabilities and Equity Accounts payable \$ 129,339 \$ 74,177 \$ 46,875 Long-term notes payable secured by mortgages on plant assets 95,719 105,030 78,480 Common stock, \$10 par value 163,500 163,500 163,500 Retained earnings 125,731 100,646 69,845 Total liabilities and equity \$ 514,289 \$ 443,353 \$ 358,700

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?

 Simon Company Common Size Comparative Balance Sheet December 31 Current year 1 Year ago 2 Year ago Assets: Cash 6.1% 8% 9.8% Accounts receivable, net 17.1% 13.7% 12.9% Merchandise inventory 21.3% 18.2% 13.8% Prepaid expenses 1.9% 2% 1.1% Plant assets, Net 53.6% 58.1% 62.4% Total assets 100% 100% 100% Liabilities and Equity: Accounts payable 25.2% 16.7% 13% Long term notes payable secured by mortgages on plant assets 18.6% 23.7% 21.9% Common stock, \$10 par value 31.8% 36.9% 45.6% Retained earnings 24.4% 22.7% 19.5% Total liabilities and Equity 100% 100% 100%

As per the above analysis:

2. Change in accounts receivable as a percentage of total assets is  Unfavorable

3. Change in merchandise inventory as a percentage of total assets is Unfavorable

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