Question

Carl Industries Carl Industries has condensed balance sheets as shown: 2011 2010 2009 Assets: Current assets 65,000 $46,500 $80,000 Plant & equipment, net 600,000 420,000 410,000 Intangible assets, net 15,000 36,500 50,000 Total assets 680,000 $503,000 540,000 Liabilities & Stockholders' Equity: Current liabilities $70,000 $25,000 $33,500 Long-term liabilities 420,000 290,000 400,000 Stockholders' equity 190,000 188,000 106,500 Total liabilities & equity $680,000 $503,000 540,000 Refer to the information for Carl Industries. In a common size balance sheet for 2009, total liabilities and equity are expressed as:

Answer 1

A common size balance sheet expresses all account figures as a percentage of total assets, total liabilities, and equity. For Carl Industries' 2009 common size balance sheet, each line item would be represented as a percentage of the total $540,000 liabilities and equity for that year.

Step-by-step explanation:

The student is asking about creating a common size balance sheet for the year 2009 based on the data provided for Carl Industries. In a common size balance sheet, all items are expressed as a percentage of a common base figure. For the year 2009, the total liabilities and equity amount to $540,000, which would be considered 100%. Every individual asset, liability, or equity figure from that year would then be expressed as a percentage of this total balance figure.

For instance, if looking at current liabilities of $33,500 for 2009, in a common size balance sheet, this would be calculated as ($33,500 / $540,000) × 100%, which would give the common size percentage for current liabilities. The same method is applied to calculate the common size percentage for all other line items on the balance sheet.

Common size balance sheets are particularly useful for financial analysis and comparison over time or between different companies, as they allow for the identification of trends in the composition of assets, liabilities, and equity, and facilitate the comparison by standardizing the numbers.