Examine the balance sheets and income statements for Fairplay Inc.

Additional information:
€¢ All sales are on credit.
€¢ All purchases of inventory are on credit.
€¢ Fairplay must begin repaying its long-term debt in 2020.

Required:
a. Prepare common size (vertical analysis) balance sheets and income statements for 2016, 2017, and 2018.
b. Analyze and interpret the common size financial statements you prepared.
c. How are these common size statements more useful than the statements originally prepared by Fairplay?
d. Why would it be unwise to examine the common size financial statements without considering the financial statements originally prepared by Fairplay?

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airplay Inc. Balance Sheets As of December 31 2018 2017 2016 Assets S 24,000 105,200 118,500 24,000 265,700 510,000 S775,700 S 20,000 70,000 90,000 16,000 196,000 370,000 S566,000 Accounts receivable Inventory Other current assets Total current assets Capital assets (net of amortizationl Total assets Liabilities and shareholders' equity Bank loans Accounts payable and accrued liabilities Total current liabilities Long-term liabilities Common shares Retained earnings Total liabilities and shareholders' equity 92,000 22,000 230,800 420,000 S850,800 188,420 140,000 250,000 197,280 S775,700 96,620 S 54,800 82,000 136,800 124,000 250,000 140,000 S650,800 S 46,000 76,000 122,000 100,000 250,000 94,000 S566,000 arplay Inc. Income Statements For the Years Ended December 31 2018 Revenue Cost of sales Gross margin Selling, general, and administrative expenses Depreciation Other expenses Interest expense Income before taxes Income tax expense:s Net income S1,040,256 492,134 548,122 251,790 60,000 126,490 30,000 79,842 17,566 S 62,276 2017 S963,200 457,800 505,400 231,000 56,000 117,120 24,000 7,280 20,000 S 57,280 2016 $860,000 420,000 440,000 220,000 46,000 96,000 16,000 62,000 16,000 S 46,000