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