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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Use following formation for P4-15 and P4-16:

McCormick & Company, Inc. is one of the world’s leading producers of spices, herbs, seasonings, condiments, and other flavorings for foods. Its products are sold to consumers, with some of the leading brands of spices and seasonings, as well as to industrial producers of foods. McCormick’s consolidated balance sheets for 20X2 and 20X3 follow.

Chapter 4, Problem 15P, Use following formation for P4-15 and P4-16: McCormick  Company, Inc. is one of the worlds leading

Common-Size and Rate of Change Analyses: McCormick Refer to the information for McCormick above.

Required:

Compute the common size balance sheet for 20X3 and the rate of change balance sheet for 20X3. Which two asset accounts and which two liabilities and shareholders’ equity accounts are the largest relative to total assets in 20X3? Which two asset accounts and which two liability and shareholders’ equity accounts grew at the fastest rates in 20X3? (Note: You may find it helpful to enter the data into an Excel spreadsheet for these computations.)

To determine

Calculate the common-size balance sheet and the rate of change balance sheet, state the two asset accounts, two liability and shareholders’ equity accounts that grew faster during 20X3.

Explanation

Common-size analysis:

In common size analysis, the amount of each item is recorded in a statement as a percentage of certain designated totals and it is more helpful for comparing statements related to two or more periods.

Common-size balance sheet and rate of change balance sheet is prepared as follows:

Company M
Consolidated Balance Sheet
Particulars  Common sizedRates of change
Assets20X2 (a)20X3(b)20X3 (b)Total assets×10020X3 (b)(a)(a)
Current Assets: 
Cash and Equivalents$79.0$63.01.4%-20.3%
Receivables$465.9$495.511.1%6.4%
Inventories$615.0$676.915.2%10.1%
Prepaid Expenses and Other Assets$125.5$134.83.0%7.4%
Total Current Assets$1,285.4$1,307.230.8%6.6%
Property and Equipment, Net$547.3$576.613.0%5.4%
Goodwill$1,695.3$1,798.540.4%6.1%
Intangible Assets, net$323.5$333.47.5%3.1%
Investments and Other Assets$313.9$371.08.3%18.2%
Total Assets$4,165.4$4,449.7100.0%6.8%
Liabilities and Shareholders’ Equity    
Current Liabilities:$140

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