Express the balance sheet data in trend percentages with 20X2 as the base year. Round percentages to the nearest whole number (zero decimal places).

Assignment Choice #2: Ratios, Common-Size Statements, and Trend Analysis

Complete the following exercise. Fill in the Excel spreadsheet titled Korbin Company provided via the link at the bottom of the page to provide your answers to parts 1 and 2. Then paste the Excel data into a Word document on which you can also write the answer to part 3.

The Korbin Company comparative income statements and balance sheets for years 20X4, 20X3, and 20X2 included the following items:

Korbin Company – Comparative Income Statements

For years ended December 31, 20X4, 20X3, and 20X2

20X4 20X3 20X2
Sales      $555,000      $340,000      $278,000
Cost of goods sold $283,500 $212,500 $153,900
Gross profit $271,500 $127,500 $124,100
Selling expenses $102,900 $ 46,920 $ 50,800
Admin expenses $ 50,668 $ 29,920 $ 22,800
Total expenses $153,568 $ 76,840 $ 73,600
Income before taxes $117,932 $ 50,660 $ 50,500
Income taxes $ 40,800 $ 10,370 $ 15,670
Net income $ 77,132 $ 40,290 $ 34,830

Korbin Company – Comparative Balance Sheets

At December 31, 20X4, 20X3, and 20X2

Assets: 20X4 20X3 20X2
Current assets      $ 52,390      $ 37,924      $ 51,748
Long-term investments $0 $ 500 $ 3,950
Plant assets, net $100,000 $ 96,000 $ 60,000
Total assets $152,390 $134,424 $115,698

 

Liabilities and Equity: 20X4 20X3 20X2
Current liabilities      $ 22,800      $ 19,960      $ 20,300
Common stock $ 72,000 $ 72,000 $ 60,000
Other paid in capital $ 9,000 $ 9,000 $ 6,000
Retained earnings $ 48,590 $ 33,464 $ 29,398
Total Liabilities+Equity $152,390 $134,424 $115,698

Required:

  1. Express the income statement data in common size percentages. Round percentages to two decimal places.
  2. Express the balance sheet data in trend percentages with 20X2 as the base year. Round percentages to the nearest whole number (zero decimal places).
  3. Provide a statement between 200 and 300 words in length for senior management in which you comment on the significant relationships revealed by the ratio and percentages computed in the above two questions plus calculate one significant liquidity, solvency, and profitability ratio as required to provide the status of the company based on the analysis of performance measures.
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