Question

Required:

1. Prepare a vertical analysis of Sports Unlimited's 2018 and 2017 balance sheets. Express each amount as a percentage of total assets for that year. (Amounts to be deducted should be indicated by a minus sign. Round your answers to 1 decimal place.)

SPORTS UNLIMITED Balance Sheets December 31 2018 2017 Amount % Amount % Assets Current assets: Cash $95,200 $63,700 Accounts receivable 44,400 24,150 Inventory 37,600 59,850 Prepaid rent 5,600 2,800 Long-term assets: Investment in bonds 45,200 0 Land 103,200 125,300 Equipment 104,000 92,050 Less: Accumulated depreciation (35,200) (17,850) Total assets $400,000 $350,000 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $26,800 $38,150 Interest payable 16,800 8,400 Income tax payable 6,000 5,600 Long-term liabilities: Notes payable 143,200 137,200 Stockholders' equity: Common stock 112,000 112,000 Retained earnings 95,200 48,650 Total liabilities and stockholders’ equity $400,000 $350,000

Answer 1

Vertical analysis :

2018 2017 Amount % Amount % Assets Current assets: Cash $95,200 23.8% $63,700 18.2% Accounts receivable 44,400 11.1% 24,150 6.9% Inventory 37,600 9.4% 59,850 17.1% Prepaid rent 5,600 1.4% 2,800 0.8% Long-term assets: Investment in bonds 45,200 11.3% 0 0 Land 103,200 25.8% 125,300 35.8% Equipment 104,000 26% 92,050 26.3% Less: Accumulated depreciation (35,200) ( 8.8% ) (17,850) ( 5.1% ) Total assets $400,000 100% $350,000 100% Liabilities and Stockholders' Equity Current liabilities: Accounts payable $26,800 6.7% $38,150 10.9% Interest payable 16,800 4.2% 8,400 2.4% Income tax payable 6,000 1.5% 5,600 1.6% Long-term liabilities: Notes payable 143,200 35.8% 137,200 39.2% Stockholders' equity: Common stock 112,000 28% 112,000 32% Retained earnings 95,200 23.8% 48,650 13.9% Total liabilities and stockholders’ equity $400,000 100% $350,000 100%

The percentages of each amount as a percentage of total assets are calculated as follows :

e.g. % of Cash for 2018 = [ $95,200 / $400,000 ] * 100 = 23.8%

Another e.g. % of Common stock for 2017 = [ $112,000/ $350,000 ] * 100 = 32%