Case Study 1

The balance sheet and income statement for ABC Company for the years 2015 and 2016 are as follows:

2015 2016

Cash $460 $300

Accounts Receivable 620 480

Inventory 1,000 730

Total Assets $2,080 $1,510

Accounts Payable $580 $310

Notes Payable 500 100

Common Stock 400 400

Retained Earnings 600 700

Total liabilities and stockholders' equity $2,080 $1,510

Income Statement

Net sales $550 $840

Cost of goods sold 120 160

Gross Margin $430 $680

Expenses:

Salaries $100 $150

Warehousing Costs 80 120

Advertising 60 90

Taxes 45 75

Total Expenses $285 $435

Net income $145 $245

Perform vertical and/or horizontal analysis of the statements and identify two things that appear to be unusual and could be possible symptoms of fraud.