(Horizontal and Vertical Analysis) Presented below is the comparative balance sh

Question

(Horizontal and Vertical Analysis) Presented below is the comparative balance sheet for Gilmour Company.

Instructions
(Round to two decimal places.)
(a) Prepare a comparative balance sheet of Gilmour Company showing the percent each item is of the
total assets or total liabilities and stockholders’ equity.
(b) Prepare a comparative balance sheet of Gilmour Company showing the dollar change and the
percent change for each item.
(c) Of what value is the additional information provided in part (a)?
(d) Of what value is the additional information provided in part (b)?

GILMOUR COMPANY COMPARATIVE BALANCE SHEET As oF DECEMBER 31, 2015 AND 2014 December 31 2015 2014 Assets Cash Accounts receivable (net) Short-term investments Inventories Prepaid expenses Plant & equipment Accumulated depreciation $ 180,000 220,000 270,000 1,060,000 25,000 2,585,000 (1,000,000) $3,340,000 275,000 155,000 150,000 980,000 25,000 1,950,000 (750,000) $2,785,000 Liabilities and Stockholders' Equity Accounts payable Accrued expenses Bonds payable Capital stock Retained earnings $50,000 170,000 450,000 2,100,000 570,000 $3,340,000 $ 75,000 200,000 190,000 1,770,000 550,000 $2,785,000

Explanation / Answer

Gilmour Company Comparative Balance Sheet As on Dec 31,2014 & 2015 Dec 31. Horizontal Analysis Details                      2,015 % of Total Assets              2,014 % of Total Assets $ change in 2015 over 2014 % change in $ over 2014. Cash                 180,000 5.39%          275,000 9.87%     (95,000) -34.55% Accounts Receivable (net )                 220,000 6.59%          155,000 5.57%        65,000 41.94% Short Term Investment                 270,000 8.08%          150,000 5.39%     120,000 80.00% Inventories              1,060,000 31.74%          980,000 35.19%        80,000 8.16% Prepaid Expense                    25,000 0.75%            25,000 0.90%                 -   0.00% Plant & Equipment              2,585,000 77.40%      1,950,000 70.02%     635,000 32.56% Accumulated Depreciation           (1,000,000) -29.94%       (750,000) -26.93% (250,000) 33.33% Total Assets              3,340,000 100.00%      2,785,000 100.00%     555,000 19.93% Liabilities & Stakeholders Equity Accounts Payable                    50,000 1.50%            75,000 2.69%     (25,000) -33.33% Accrued Expenses                 170,000 5.09%          200,000 7.18%     (30,000) -15.00% Bond Payable                 450,000 13.47%          190,000 6.82%     260,000 136.84% Capital Stock              2,100,000 62.87%      1,770,000 63.55%     330,000 18.64% Retaimed Earning                 570,000 17.07%          550,000 19.75%        20,000 3.64% Total              3,340,000 100.00%      2,785,000 100.00%     555,000 19.93% Vertical analysis (a) compares the % of a line item with respect to total assets or sales from year to year . It is useful for comparing intercompany information and comparing against benchmark. Horizontal analysis (b) compares the change in value and % of a single component over a previous base year, this is   useful for trend analysis of a sigle company's data over different periods.

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