Question

Ch. 16 Q 1

Complete a horizontal analysis for Brown Company. (Negative answers should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Round the "percent" answers to the nearest hundredth percent.)

BROWN COMPANY Comparative Balance Sheet December 31, 2016 and 2017
					INCREASE (DECREASE)
	2017		2016		Amount	Percent
Assets
Current assets:
Cash	$	13,950	$	9,150	$	%
Accounts receivable		19,350		14,400		%
Merchandise inventory		19,650		23,850		%
Prepaid advertising		55,800		46,350		%
Total current assets	$	108,750	$	93,750	$	%
Plant and equipment:
Building (net)		120,900		127,350	$	%
Land		94,500		94,500		%
Total plant and equipment	$	215,400	$	221,850		%
Total assets	$	324,150	$	315,600	$	%
Liabilities
Current liabilities:
Accounts payable	$	133,350	$	120,900	$	%
Salaries payable		23,850		18,900		%
Total current liabilities	$	157,200	$	139,800	$	%
Long-term liabilities:
Mortgage note payable		100,350		87,900		%
Total liabilities	$	257,550	$	227,700	$	%
Owner’s Equity
J. Brown, capital		66,600		87,900		%
Total liabilities and owner’s equity	$	324,150	$	315,600	$	%

Answer 1

In this horizontal analysis, we are comparing the values in the year 2017 with 2016.
Positive change in the percentage means increase in values in the year 2017 compared to year 2016, and negative means decrease in values. We call the year 2016 as the base year with which we are comparing the latest year (that is 2017) values.

For percentage tab, formula used is (Amount in 2017-Amount in 2016)/Amount in 2016 in percentage.

For amount tab, the formula used is (Amount in year 2017 - Amount in year 2016)