Question

Selected comparative financial statements of Korbin Company follow.

KORBIN COMPANY
Comparative Income Statements
For Years Ended December 31, 2019, 2018, and 2017
	2019			2018			2017
Sales	$	386,357		$	295,981		$	205,400
Cost of goods sold		232,587			186,172			131,456
Gross profit		153,770			109,809			73,944
Selling expenses		54,863			40,845			27,113
Administrative expenses		34,772			26,046			17,048
Total expenses		89,635			66,891			44,161
Income before taxes		64,135			42,918			29,783
Income tax expense		11,929			8,798			6,046
Net income	$	52,206		$	34,120		$	23,737

KORBIN COMPANY
Comparative Balance Sheets
December 31, 2019, 2018, and 2017
	2019			2018			2017
Assets
Current assets	$	55,556		$	37,184		$	49,706
Long-term investments		0			1,000			3,140
Plant assets, net		104,780			95,006			57,502
Total assets	$	160,336		$	133,190		$	110,348
Liabilities and Equity
Current liabilities	$	23,409		$	19,845		$	19,311
Common stock		73,000			73,000			55,000
Other paid-in capital		9,125			9,125			6,111
Retained earnings		54,802			31,220			29,926
Total liabilities and equity	$	160,336		$	133,190		$	110,348

Required:
1. Complete the below table to calculate each year's current ratio.

2. Complete the below table to calculate income statement data in common-size percents. (Round your percentage answers to 2 decimal places.)

3. Complete the below table to calculate the balance sheet data in trend percents with 2017 as base year. (Round your percentage answers to 2 decimal places.)

4. Refer to the results from parts 1, 2, and 3.

(a) Did cost of goods sold make up a greater portion of sales for the most recent year?

• Yes

• No

(b) Did income as a percent of sales improve in the most recent year?

• Yes

• No

(c) Did plant assets grow over this period?

• Yes

• No

Answer 1

1)

Current Ratio = Current Asset / Current Liabilities

2019 = 55556 / 23409 = 2.37

2018 = 37184 / 19845 = 1.87

2017 = 49706 / 19311 = 2.57

2)

Common Size Income Statement
	2019	Percentage	2018	Percentage	2017	Percentage
Sales	386,357	100.00%	295,981	100.00%	205,400	100.00%
Cost of Goods Sold	232,587	60.20%	186,172	62.90%	131,456	64.00%
Gross Profit	153,770	39.80%	109,809	37.10%	73,944	36.00%
Selling Expense	54,863	14.20%	40,845	13.80%	27,113	13.20%
Administrative Expense	34,772	9.00%	26,046	8.80%	17,048	8.30%
Total Expense	89,635	23.20%	66,891	22.60%	44,161	21.50%
Income Before Taxes	64,135	16.60%	42,918	14.50%	29,783	14.50%
Income Tax Expense	11,929	3.09%	8,798	2.97%	6,046	2.94%
Net Income	52,206	13.51%	34,120	11.53%	23,737	11.56%

Percentage is found by dividing the each item by sales amount.

3)

Trend Analysis of Balance Sheet
	2019	2017	Increase (Decrease)	% of Change	2018	2017	Increase (Decrease)	% of Change
Current Asset	55,556	49,706	5,850	11.77%	37,184	49,706	(12,522)	-25.19%
Long Term Investment	-	3,140	(3,140)	-100.00%	1,000	3,140	(2,140)	-68.15%
Plant Asset - Net	104,780	57,502	47,278	82.22%	95,006	57,502	37,504	65.22%
Total Asset	160,336	110,348	49,988	45.30%	133,190	110,348	22,842	20.70%
Liabilities and Equity
Current Liabilities	23,049	19,311	3,738	19.36%	19,845	19,311	534	2.77%
Common Stock	73,000	55,000	18,000	32.73%	73,000	55,000	18,000	32.73%
Other Paid in Capital	9,125	6,111	3,014	49.32%	9,125	6,111	3,014	49.32%
Retained Earnings	54,802	29,926	24,876	83.13%	31,220	29,926	1,294	4.32%
Total Liabilities and Equity	160,336	110,348	49,988	45.30%	133,190	110,348	22,842	20.70%

Increase or decrease = Amount in Current Year - Amount in Base year

% changes = Increase or Decrease / Amount in Base year x 100%

4)

a) No . Cost of goods sold reducing year by year while comparing with sales.

b) Yes. Net income increased while comparing with last year

c) Yes increased