Question

Here is financial information for Glitter Inc. December 31, 2020 December 31, 2019 Current assets $123,000 $100,000 Plant assets (net) 395,214 331,000 Current liabilities 88,134 74,000 Long-term liabilities 136,840 88,000 Common stock, $1 par 166,026 118,000 Retained earnings 127,214 151,000 Prepare a schedule showing a horizontal analysis for 2020, using 2019 as the base year.

Answer 1

Answer:

                           Dec 31, 2020  Dec 31, 2019   Increase/Decrease

                                        $                $                   $              %

Assets

Plant assets (net)      395,214      331,000         64,214      19.40

Current assets          123,000      100,000        23,000     23.00

Total Assets              518,214      431,000        87,214      20.24

Equity

Common stock,        166,026      118,000          48026     40.70

Retained earnings    127,214       151,000          (23786)    (15.75)

Liability

Current liabilities      88,134         74,000          14,134       19.10

Long-term liabilities 136,840       88,000         48840      55.50

Total Equity & Liab  518,214      431,000         87,214      20.24

Explanation:

Total Asset has been increase by 20.24% and it is net increase by both current and non current assets. In equity section there is an increase in the common stock by 40.70% which indicate there is an issue of stock in 2020. The retained earning is decreased significantly which shows either there is a loss net loss this year or any dividend payment which decrease the retained earning as compared to 2019. There is also an increase in total liability, the major contribution to this increase is of Long term liabilities which is significantly increased by 55.5%. I think it might be a reason for if there is a net loss in 2020 which reduces the retained earning in the form of interest expense which is also increased.