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Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447

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BuyFindarrow_forward

Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447
Textbook Problem

Prepare a vertical analysis of the balance sheet for Royal Equipment Supply, Inc., on pages 487-488.

To determine

The balance sheet of Royal Equipment Supply, Inc. for June 30,2016, if cash account is $3,400, accounts receivables are $5,600, merchandise inventory is $98,700, prepaid insurance is $455, supplies are $800, land and building is $147,000, fixtures are $8,600, delivery vehicles are $27,000, forklift is $7,000, goodwill is $10,000, accounts payables are $16,500, notes payables are $10,000, common stock is $185,055, mortgage payable is $67,000 and retained earnings are $30,000.

Explanation

Given Information:

The cash account is $3,400, accounts receivables are $5,600, merchandise inventory is $98,700, prepaid insurance is $455, supplies are $800, land and building is $147,000, fixtures are $8,600, delivery vehicles are $27,000, forklift is $7,000, goodwill is $10,000, accounts payables are $16,500, notes payables are $10,000, common stock is $185,055, mortgage payable is $67,000 and retained earnings are $30,000.

Formula used:

Follow the steps to prepare a vertical analysis of a balance sheet:

Step 1: Using the percentage formula, Rate=Portion÷Base to compute the percentage of each item on the balance sheet. Use each item as the portion and total assets as the base.

Step 2: Round each answer to the nearest tenth of percent.

Step 3: Write the percent of each balance sheet item in a column to the right of the monetary amount.

Consider the provided information,

The cash account is $3,400, accounts receivables are $5,600, merchandise inventory is $98,700, prepaid insurance is $455, supplies are $800, land and building is $147,000, fixtures are $8,600, delivery vehicles are $27,000, forklift is $7,000, goodwill is $10,000, accounts payables are $16,500, notes payables are $10,000, common stock is $185,055, mortgage payable is $67,000 and retained earnings are $30,000.

Compute Total Current Assets by adding all the current assets,

Total Current Assets=Cash+Accounts receivables+Merchandise inventory+Prepaid salary+Supplies=3,400+5,600+98,700+455+800=$108,955

Compute percentage of Total Current Assets as,

% of Total Current Assets=Cash%+Accounts receivables%+Merchandise inventory%+Prepaid salary%+Supplies%=1.1+1.8+32+0.1+0.3=35.3%

Compute total of Property, Plant and Equipment by adding all Property, Plant and Equipment as,

Total of Property, Plant and Equipment=Land and Building+Fixture+DeliveryVehicles+Forklift=147,000+8,600+27,000+7,000=$189,600

Now, compute percentage of total of Property, Plant and Equipment as,

% of Total of Property, Plant and Equipment=Land and Building%+Fixture%+DeliveryVehicles%+Forklift%=47.6+2.8+8.8+2.3=61.4%

Compute Total Assets by adding the current assets and property, plant and equipment,

Total Assets=Total Current Assets+Total of Property, Plant and Equipment+Invetments and other Assets=108,955+189,600+10,000=$308,555

Now, compute the percentage of Total Assets as,

% of Total Assets=Total Current Assets%+Total of Property, Plant and Equipment%+Invetments and other Assets%=35.3+61.4+3.3=100%

Compute Total Current Liabilities by adding all current liabilities,

Total Current Liabilities=Accounts payable+Notes payable=16,500+10,000=$26,500

Now, compute the percentage of Total Current Liabilities as,

% of Total Current Liabilities=Accounts payable%+Notes payable%=5

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