Bob Cleary, the controller of Mountain-Pacific Railroad, has prepared the financial statements for 2014 and 2015, shown below and on the next page. The market prices of the company’s stock as of January 1, 2014, December 31, 2014, and December 31, 2015, were $50, $45, and $70 per share, respectively. Assume an income tax rate of 34 percent and assume that interest expense was incurred only on long-term debt (including the current maturities of long-term debt).

a. Prepare common-size balance sheets and income statements for 2014 and 2015 and analyze the results.

b. Which income statement account experienced the largest shift from 2014 to 2015? Did this shift appear to have any impact on the balance sheet? Explain.
c. What benefits do common-size financial statements provide over standard financialstatements?

  • CreatedAugust 19, 2014
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