Mike Sanders is considering the purchase of Kepler Company, a firm specializing in the manufacture of office supplies. To be able to assess the financial capabilities of the company, Mike has been given the companys financial statements for the 2 most recent years.

Kepler Company Comparative Balance Sheets
	This Year	Last Year
Assets
Current assets:
Cash	$50,000.00	$100,000.00
Accounts Receivable, net	300,000.00	150,000.00
Inventory	600,000.00	400,000.00
Prepaid expenses	25,000.00	30,000.00
Total current assets	$975,000.00	$680,000.00
Property and equipment, net	125,000.00	150,000.00
Total assets	$1,100,000.00	$830,000.00
Liabilities and Stockholders Equity
Current liabilities:
Accounts payable	$400,000.00	$290,000.00
Short-term notes payable	200,000.00	60,000.00
Total current liabilities	$600,000.00	$350,000.00
Long-term bonds payable, 12%	100,000.00	150,000.00
Total liabilities	$700,000.00	$500,000.00
Stockholders equity:
Common stock (100,000 shares)	200,000.00	200,000.00
Retained earnings	200,000.00	130,000.00
Total liabilities and stockholders equity	$1,100,000.00	$830,000.00

Kepler Company Comparative Income Statements
	This Year	Last Year
Sales	$950,000.00	$900,000.00
Less: Cost of goods sold	(500,000.00)	(490,000.00)
Gross margin	$450,000.00	$410,000.00
Less operating expenses:
Selling and Administrative expenses	(275,000.00)	(260,000.00)
Operating income	$175,000.00	$150,000.00
Less:
Interest expense	(12,000.00)	(18,000.00)
Net income before taxes	$163,000.00	$132,000.00
Less:
Income taxes	(65,200.00)	(52,800.00)
Net income after taxes	$97,800.00	$79,200.00
Less:
Dividends	(27,800.00)	(19,200.00)
Net income, retained	$70,000.00	$60,000.00

Required:

1. Express each item in the asset section of the balance sheet as a percentage of total assets for each year. (Note: Enter a decrease as a negative number if applicable. Round all percentages to one decimal place.)

Kepler Company
Comparative Balance Sheets
	This Year	This Year	Last Year	Last Year
Assets
Current assets:
Cash	$50,000.00		$100,000.00
Accounts Receivable, net	300,000.00		150,000.00
Inventory	600,000.00		400,000.00
Prepaid expenses	25,000.00		30,000.00
Total current assets	$975,000.00		$680,000.00
Property and equipment, net	125,000.00		150,000.00
Total assets	$1,100,000.00		$830,000.00

Feedback

1. Set up both years in balance sheet form, assets section. Start with total assets at 100%. Then compare each line amount to each year's total assets.

2. Express each item in the liabilities and equity section as a percentage of total liabilities and equity for each year. (Note: Enter a decrease as a negative number if applicable. Round all percentages to one decimal place.)

Kepler Company
Comparative Balance Sheets
	This Year	This Year	Last Year	Last Year
Liabilities and Stockholders Equity
Current liabilities:
Accounts payable	$400,000.00		$290,000.00
Short-term notes payable	200,000.00		60,000.00
Total current liabilities	$600,000.00		$350,000.00
Long-term bonds payable, 12%	100,000.00		150,000.00
Total liabilities	$700,000.00		$500,000.00
Stockholders equity:
Common stock (100,000 shares)	200,000.00		200,000.00
Retained earnings	200,000.00		130,000.00
Total liabilities and stockholders equity	$1,100,000.00		$830,000.00

Feedback

2. Set up both years in balance sheet form, liabilities and stockholders' equity section. Start with total liabilities and stockholders' equity at 100%. Then compare each line amount to each years total liabilities and stockholders' equity.

3. Express each item in the income statement as a percentage of sales for each year. (Note: Enter a decrease as a negative number if applicable. Round all percentages to one decimal place.) Due to rounding, percentages may not total 100%.

Kepler Company
Comparative Income Statement
	This Year	This Year	Last Year	Last Year
Sales	$950,000.00		$900,000.00
Less: Cost of goods sold	(500,000.00)		(490,000.00)
Gross margin	$450,000.00		$410,000.00
Less operating expenses:
Selling and Administrative expenses	(275,000.00)		(260,000.00)
Operating income	$175,000.00		$150,000.00
Less:
Interest expense	(12,000.00)		(18,000.00)
Net income before taxes	$163,000.00		$132,000.00
Less:
Income taxes	(65,200.00)		(52,800.00)
Net income after taxes	$97,800.00		$79,200.00
Less:
Dividends	(27,800.00)		(19,200.00)
Net income, retained	$70,000.00		$60,000.00