Perform a Horizontal Analysis of the Following Company's Balance Sheet

question 66

Essay

Perform a horizontal analysis of the following company's balance sheet. Include both the amount and the percentage of change for each account.
$$\begin{array} { | l | r | r | r | r | } \hline \text { Account } &{ \mathbf { 2 0 1 1 } } & { \mathbf { 2 0 1 0 } } & \text { Change Amount } & \text { Change Percent } \\\hline \text { Current assets } & \$ 121,000 & \$ 100,000 & & \\\hline \text { Accounts receivable } & 117,000 & 125,000 & & \\\hline \text { Merchandise inventory } & 70,000 & 85,000 & & \\\hline \text { Current liabilities } & 63,500 & 50,000 & & \\\hline \text { Long-term liabilities } & 100,000 & 100,000 & & \\\hline \text { Common stock } & 50,000 & 50,000 & & \\\hline \text { Retained earnings } & 94,500 & 110,000 & & \\\hline\end{array}$$

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Definitions:

Aging Schedule

A table summarizing the amounts owed to a business, grouped by the length of time the bills have been outstanding, used to monitor and manage receivables.

Old Accounts Receivables

Outstanding invoices a company has yet to collect from customers past the due date.

Percentage of Receivables Basis

An accounting method used to estimate the amount of receivables that will not be collected by calculating a percentage of the total receivables.

Income Statement Relationships

The connections between various financial items on the income statement, illustrating how sales revenue affects net income.