James Birch is the principal owner of ABC Company, a medium-sized company that sells office equipment to an office supply company that operates in the Midwest. Recently, James received an anonymous tip that the financial statements of ABC for the most recent year, 20X2, were fraudulent. James has contacted you, a forensic accountant, to perform an analysis of the company as a starting point of an investigation. You have organized the information into the following table:

Required

a. Complete the table.

b. What areas, if any, appear to deserve closer examination? Why? 

c. For any areas identified in (b), name two procedures that you could perform to determine whether the area is misstated.

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ABC Company Vertical Analysis Horizontal Analysis Change % Balance Sheet Year 20X1 Year 20X2 Elements Cash Amount % Amount % Amount $ 1,035,263 $ 643,258 Accounts receivable (net) 5,738,932 8,532,970 Inventory 9,250,164 8,432,581 Plant and equipment (net) 12,593,298 12,789,315 Total assets $28,617,657 $30,398,124 Accounts payable $ 739,582 $ 738,431 Non-current debt Common stock 1,075,213 400,000 985,234 400,000 Paid-in capital 953,621 953,621 Retained earnings 25,449,241 27,320,838 Total liabilities and equity $28,617,657 $30,398,124 Net sales $16,358,172 $20,951,359 Cost of goods sold 9,814,903 9,179,156 Gross profit 6,543,269 11,772,203 Selling expenses 1,938,251 2,539,487 Administrative expenses 2,583,421 3,062,512 Net income 2,021,597 6,170,204