{"id":201743,"date":"2025-03-15T22:06:55","date_gmt":"2025-03-15T22:06:55","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=201743"},"modified":"2025-03-15T22:06:57","modified_gmt":"2025-03-15T22:06:57","slug":"prepare-the-2009-combined-common-size","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2025\/03\/15\/prepare-the-2009-combined-common-size\/","title":{"rendered":"Prepare the 2009 combined common-size"},"content":{"rendered":"\n

Prepare the 2009 combined common-size, common-base year balance sheet for Just Dew It.<\/p>\n\n\n\n

The correct answer and explanation is :<\/strong><\/mark><\/p>\n\n\n\n

To prepare a combined common-size and common-base year balance sheet for Just Dew It (assuming this is a hypothetical company), we need to follow a structured process. Here\u2019s how we would approach it:<\/p>\n\n\n\n

Step 1: Understand the Common-Size and Common-Base Year Concepts<\/h3>\n\n\n\n
    \n
  1. Common-Size Balance Sheet:<\/strong> In a common-size balance sheet, each item is expressed as a percentage of total assets. This allows for easier comparison across time periods or companies of different sizes. The formula for a common-size balance sheet item is:
    [
    \\text{Common-Size Percentage} = \\left(\\frac{\\text{Account Value}}{\\text{Total Assets}}\\right) \\times 100
    ]<\/li>\n\n\n\n
  2. Common-Base Year Balance Sheet:<\/strong> In a common-base year balance sheet, each line item is compared to a base year value. The base year is typically set to 100%, and each subsequent year is expressed as a percentage change from the base year. [
    \\text{Common-Base Year Percentage} = \\left(\\frac{\\text{Item Value in Current Year}}{\\text{Item Value in Base Year}}\\right) \\times 100
    ]<\/li>\n<\/ol>\n\n\n\n

    Step 2: Create the Balance Sheet<\/h3>\n\n\n\n

    Assume the following balance sheet values for 2009 (in thousands of dollars) and 2008 (base year):<\/p>\n\n\n\n

    2008 (Base Year):<\/h4>\n\n\n\n
    Assets<\/strong><\/th>Amount<\/strong><\/th>Liabilities and Equity<\/strong><\/th>Amount<\/strong><\/th><\/tr><\/thead>
    Cash<\/td>50<\/td>Accounts Payable<\/td>60<\/td><\/tr>
    Accounts Receivable<\/td>80<\/td>Long-Term Debt<\/td>100<\/td><\/tr>
    Inventory<\/td>120<\/td>Shareholder Equity<\/td>90<\/td><\/tr>
    Total Assets<\/td>250<\/td>Total Liabilities & Equity<\/td>250<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

    2009:<\/h4>\n\n\n\n
    Assets<\/strong><\/th>Amount<\/strong><\/th>Liabilities and Equity<\/strong><\/th>Amount<\/strong><\/th><\/tr><\/thead>
    Cash<\/td>70<\/td>Accounts Payable<\/td>80<\/td><\/tr>
    Accounts Receivable<\/td>100<\/td>Long-Term Debt<\/td>120<\/td><\/tr>
    Inventory<\/td>130<\/td>Shareholder Equity<\/td>100<\/td><\/tr>
    Total Assets<\/td>300<\/td>Total Liabilities & Equity<\/td>300<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

    Step 3: Common-Size (2009)<\/h3>\n\n\n\n

    For the common-size balance sheet, we calculate the percentage of total assets for each item.<\/p>\n\n\n\n

    Assets<\/strong><\/th>Amount (2009)<\/strong><\/th>% of Total Assets<\/strong><\/th><\/tr><\/thead>
    Cash<\/td>70<\/td>23.33%<\/td><\/tr>
    Accounts Receivable<\/td>100<\/td>33.33%<\/td><\/tr>
    Inventory<\/td>130<\/td>43.33%<\/td><\/tr>
    Total Assets<\/strong><\/td>300<\/td>100%<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
    Liabilities and Equity<\/strong><\/th>Amount (2009)<\/strong><\/th>% of Total Liabilities & Equity<\/strong><\/th><\/tr><\/thead>
    Accounts Payable<\/td>80<\/td>26.67%<\/td><\/tr>
    Long-Term Debt<\/td>120<\/td>40%<\/td><\/tr>
    Shareholder Equity<\/td>100<\/td>33.33%<\/td><\/tr>
    Total Liabilities & Equity<\/strong><\/td>300<\/td>100%<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

    Step 4: Common-Base Year (2009 Compared to 2008)<\/h3>\n\n\n\n

    For the common-base year, we express 2009 as a percentage of 2008 for each item:<\/p>\n\n\n\n

    Assets<\/strong><\/th>2008 Amount<\/strong><\/th>2009 Amount<\/strong><\/th>Common-Base Year Percentage<\/strong><\/th><\/tr><\/thead>
    Cash<\/td>50<\/td>70<\/td>140%<\/td><\/tr>
    Accounts Receivable<\/td>80<\/td>100<\/td>125%<\/td><\/tr>
    Inventory<\/td>120<\/td>130<\/td>108.33%<\/td><\/tr>
    Total Assets<\/strong><\/td>250<\/td>300<\/td>120%<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
    Liabilities and Equity<\/strong><\/th>2008 Amount<\/strong><\/th>2009 Amount<\/strong><\/th>Common-Base Year Percentage<\/strong><\/th><\/tr><\/thead>
    Accounts Payable<\/td>60<\/td>80<\/td>133.33%<\/td><\/tr>
    Long-Term Debt<\/td>100<\/td>120<\/td>120%<\/td><\/tr>
    Shareholder Equity<\/td>90<\/td>100<\/td>111.11%<\/td><\/tr>
    Total Liabilities & Equity<\/strong><\/td>250<\/td>300<\/td>120%<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

    Step 5: Explanation<\/h3>\n\n\n\n

    Common-Size Balance Sheet:<\/strong> The common-size analysis for 2009 shows that cash represents 23.33% of total assets, accounts receivable accounts for 33.33%, and inventory is 43.33%. This format helps to easily compare how assets are distributed across different categories, showing that the company has a large portion of assets tied up in inventory.<\/p>\n\n\n\n

    Common-Base Year Balance Sheet:<\/strong> The common-base year analysis compares 2009 to 2008, indicating that total assets have grown by 20%, cash has increased by 40%, and inventory has increased by 8.33%. This percentage comparison shows the overall growth and changes in the company’s financial structure, highlighting a significant increase in cash and accounts receivable.<\/p>\n\n\n\n

    In summary, combining these two approaches allows for a comprehensive understanding of the company’s financial performance over time and how its financial structure has evolved.<\/p>\n","protected":false},"excerpt":{"rendered":"

    Prepare the 2009 combined common-size, common-base year balance sheet for Just Dew It. The correct answer and explanation is : To prepare a combined common-size and common-base year balance sheet for Just Dew It (assuming this is a hypothetical company), we need to follow a structured process. Here\u2019s how we would approach it: Step 1: […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-201743","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/201743","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=201743"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/201743\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=201743"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=201743"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=201743"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}