Question

Last year (2020), which is used as the base year, a firm had cash of $155, accounts receivable of $565, inventory of $245, and net fixed assets of $845. This year, the firm has cash of $195, accounts receivable of $585, inventory of $325, and net fixed assets of $965. 8. What is the common-base year value of accounts receivable? 9. What is the common-base year value of cash? 10. What is the common-base year value of net fixed assets?

Answer 1

To find the common-base year value of each asset, we need to compare the current year's value to the base year's value and calculate the percentage change. Here are the calculations for each asset:

Common-Base Year Value of Accounts Receivable:

Percentage Change = (Current Year Value - Base Year Value) / Base Year Value

Percentage Change = ($585 - $565) / $565

Percentage Change = $20 / $565

Percentage Change = 0.0354 or 3.54%

Common-Base Year Value of Accounts Receivable = Base Year Value + (Percentage Change * Base Year Value)

Common-Base Year Value of Accounts Receivable = $565 + (0.0354 * $565)

Common-Base Year Value of Accounts Receivable = $565 + $20

Common-Base Year Value of Accounts Receivable = $585

Therefore, the common-base year value of accounts receivable is $585.

Common-Base Year Value of Cash:

Percentage Change = (Current Year Value - Base Year Value) / Base Year Value

Percentage Change = ($195 - $155) / $155

Percentage Change = $40 / $155

Percentage Change = 0.2581 or 25.81%

Common-Base Year Value of Cash = Base Year Value + (Percentage Change * Base Year Value)

Common-Base Year Value of Cash = $155 + (0.2581 * $155)

Common-Base Year Value of Cash = $155 + $40

Common-Base Year Value of Cash = $195

Therefore, the common-base year value of cash is $195.

Common-Base Year Value of Net Fixed Assets:

Percentage Change = (Current Year Value - Base Year Value) / Base Year Value

Percentage Change = ($965 - $845) / $845

Percentage Change = $120 / $845

Percentage Change = 0.1420 or 14.20%

Common-Base Year Value of Net Fixed Assets = Base Year Value + (Percentage Change * Base Year Value)

Common-Base Year Value of Net Fixed Assets = $845 + (0.1420 * $845)

Common-Base Year Value of Net Fixed Assets = $845 + $120

Common-Base Year Value of Net Fixed Assets = $965

Therefore, the common-base year value of net fixed assets is $965.