Mike Sanders is considering the purchase of Kepler Company, a firm specializing in the manufacture of office supplies. To be able to assess the financial capabilities of the company, Mike has been given the company’s financial statements for the 2 most recent years. Refer to the information for Kepler Company on the previous page. Required: Note : Round all percentages to one decimal place. 1. Express each item in the asset section of the balance sheet as a percentage of total assets for each year. 2. Express each item in the liabilities and equity section as a percentage of total liabilities and equity for each year. 3. Express each item in the income statement as a percentage of sales for each year.

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
Publisher: Cengage Learning
ISBN: 9781337115773

Chapter
Section

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
Publisher: Cengage Learning
ISBN: 9781337115773
Chapter 15, Problem 60P
Textbook Problem
15 views

Mike Sanders is considering the purchase of Kepler Company, a firm specializing in the manufacture of office supplies. To be able to assess the financial capabilities of the company, Mike has been given the company’s financial statements for the 2 most recent years.Refer to the information for Kepler Company on the previous page.Required:Note: Round all percentages to one decimal place. 1. Express each item in the asset section of the balance sheet as a percentage of total assets for each year. 2. Express each item in the liabilities and equity section as a percentage of total liabilities and equity for each year. 3. Express each item in the income statement as a percentage of sales for each year.

1.

To determine

Show each item of the asset section in the balance sheet in terms of percentage of total assets for this year and last year.

Explanation of Solution

Common-size analysis

One of the techniques of financial statement analysis is common-size analysis where each item in the financial statement is expressed in terms of percentage to compare present statement with the statement of the previous year. Horizontal and vertical analyses are two forms of analysis under common-size analysis.

Percentage of line items in asset section of balance sheet as percent of total assets:

 Particulars This year (amount in $) Percentage (%) Last year (amount in$) Percentage (%) Assets Current assets Cash 50,000 4.5 100,000 12 Accounts receivables 300,000 27...

2.

To determine

Show each item of liabilities and equity section in the balance sheet in terms of percentage of total liabilities for this year and last year.

3.

To determine

Show each item in the income statement in terms of percentage of sales for this year and last year.

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started