Bob Cleary, the controller of Mountain-Pacific Railroad, has prepared the financial statements for 2016 and 2017, which follow. The market prices of the company€™s stock as of January 1, 2016, December 31, 2016, and December 31, 2017, 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).

REQUIRED:
a. Prepare common-size balance sheets and income statements for 2016 and 2017 and analyze the results.
b. Which income statement account experienced the largest shift from 2016 to 2017? Did this shift appear to have any impact on the balance sheet? Explain.
c. What benefits do common-size financial statements provide over standard financial statements?* For this problem, assume that this loss is an unusual loss. Assume 11,000 shares outstanding throughout 2016 and 20,000 at year-end 2017.

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Balance Sheet 2017 2016 Assets Current assets: $ 10,000 $ 312,000 Cash 120,000 Short-term investments 125,000 Accounts receivable 150,000 500,000 Inventory 210,000 200,000 Prepaid expenses 50,000 75,000 $ 885,000 $ 867,000 Total current assets Long-term investments 225,000 225,000 Property, plant, and equipment 430,000 540,000 Less: Accumulated depreciation (65,000) (100,000) $1,475,000 $1,532,000 Total assets Liabilities and Shareholders' Equity Current liabilities: Accounts payable $ 10,000 $ 50,000 Salaries and wages payable 5,000 2,000 Dividends payable 125,000 5,000 Income taxes payable 50,000 35,000 Notes payable 100,000 175,000 Total current liabilities $ 290,000 $ 267,000 Mortgage payable 350,000 450,000 Common stock 335,000 205,000 Retained earnings 500,000 610,000 Total liabilities and shareholders' equity $1,475,000 $1,532,000