Question

Simon Company's year-end balance sheets follow.

At December 31	Current Yr				1 Yr Ago			2 Yrs Ago
Assets
Cash		$	35,375		$	41,772		$	43,086
Accounts receivable, net			105,666			72,362			55,741
Merchandise inventory			130,224			99,525			59,964
Prepaid expenses			11,624			11,076			4,645
Plant assets, net			328,921			302,687			267,464
Total assets		$	611,810		$	527,422		$	430,900
Liabilities and Equity
Accounts payable		$	156,911		$	90,026		$	57,448
Long-term notes payable secured by mortgages on plant assets			115,020			122,520			96,181
Common stock, $10 par value			163,500			163,500			163,500
Retained earnings			176,379			151,376			113,771
Total liabilities and equity		$	611,810		$	527,422		$	430,900

REQUIRED:
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 Sheets December 31 Current Year 1 Year Ago 2 Years Ago Assets Cash % % % Accounts receivable, net Merchandise inventory Prepaid expenses Plant assets, net Total assets % % % Liabilities and Equity Accounts payable % % % Long-term notes payable secured by mortgages on plant assets Common stock, $10 par Retained earnings Total liabilities and equity % % %

2.Change in accounts receivable: favorable development or unfavorable development?
3.Change in merchandise inventory: favorable development or unfavorable development?

Answer 1

Answer-1)-

SIMON COMPANY
BALANCE SHEET DATA IN TREND PERCENTS
FOR YEARS ENDED DECEMBER 31
PARTICULARS	Current Yr	%	1 Yr Ago	%	2 Yrs Ago	%
	$		$		$
ASSETS
Cash	35375	5.8	41772	7.9	43086	10.0
Accounts receivable, net	105666	17.3	72362	13.7	55741	12.9
Merchandise inventory	130224	21.3	99525	18.9	59964	13.9
Prepaid expenses	11624	1.9	11076	2.1	4645	1.1
Plant assets,net	328921	53.8	302687	57.4	267464	62.1
Total assets	611810	100.0	527422	100.0	430900	100.0
Liabilities & Equity
Accounts payable	156911	25.65	90026	17.07	57448	13.33
Long-term notes payable by mortgages on plant assets	115020	18.80	122520	23.23	96181	22.32
Common stock, $10 par value	163500	26.72	163500	31.00	163500	37.94
Retained earnings	176379	28.83	151376	28.70	113771	26.40
Total liabilities & equity	611810	100.00	527422	100.00	430900	100.00

2)- Change in accounts receivable= Unfavorable development.

3)- Change in merchandise inventory = Unfavorable development.