Please help me!!! I am doing a problem and I am stuck onpreparing a common size incomestatement for the three years and prepare a common size income statement for each division for all the years. Here are the two original questions.

d. Use the income statement information to prepare a common-size income statement for all three years. See Figure 8-7 (p. 229) for an example. Use the information to identify accounts for which you believe there is a concern about material misstatements. Use a format similar to the following:

e. Use the three divisional income statements in the Pinnacle_Financials Excel file on the Web site to prepare a common-size income statement for each of the three divisions for all three years. Each divisions income statement is in a separate worksheet in the Excel file. Use the information to identify accounts for which you believe there is a concern about material misstatements. Use a format similar to the one in requirement d.

someone help me please I am really lost.

8-40 (Objectives 8-3,8-4,8-5) Background Information Your audit firm has recently been engaged as the new auditor for Pinnacle Manufacturing effective for the audit of the financial statements for the year ended December 31, 2011. Pinnacle is a mediumsized corporation, with its headquarters located in Detroit, Michigan. The company is made up of three divisions. The first division, Welburn, has been in existence for 35 years and creates powerful diesel engines for boats, trucks, and commercial farming equipment. The second division, SolarElectro, was recently acquired from a high-tech manufacturing firm based out of Dallas, Texas. SolarElectro produces state-of-the-art, solar-powered engines. The solar-powered engine market is relatively new, and Pinnacle's top management believes that the Solar-Electro division will be extremely profitable in the future as the focus on global climate change continues and when highly anticipated EPA regulations make solar-powered engines mandatory for certain public transportation vehicles. Finally, the third division, Machine-Tech, engages in a wide variety of machine service and repair operations. This division, also new to Pinnacle, is currently in its second year of operations. Pinnacle's board of directors has recently considered selling the Machine-Tech division in order to focus more on core operationsengine manufacturing. However, before any sale will be made, the board has agreed to evaluate this year's operating results. Excellent operating results may have the effect of keeping the division a part of Pinnacle for the next few years. The vice president for MachineTech is committed to making it profitable. PART 1 The purpose of Part I is to perform preliminary analytical procedures as part of the audit planning process. You have been asked to focus your attention on two purposes of analytical procedures: obtain an understanding about the client's business and indicate where there is an increased likelihood of misstatements. Required: a. Refer to the financial statement data in Figure 8-9 for the current year and prior two years. Analyze the year-to-year change in account balance for at least five financial statement line items. Document the trend analysis in a format similar to the following: b. Calculate at least five common ratios shown on pages 232-233 and document them in a format similar to the following: c. Based on the analytical procedures calculated in parts a. and b., summarize your observations about Pinnacle's business, including your assessment of the client's business risk. d. Use the income statement information to prepare a common-size income statement for all three years. See Figure 8-7 (p. 229) for an example. Use the information to identify accounts for which you believe there is a concern about material misstatements. Use a format similar to the following: e. Use the three divisional income statements in the Pinnacle_Financials Excel file on the Web site to prepare a common-size income statement for each of the three divisions for all three years. Each division's income statement is in a separate worksheet in the Excel file. Use the information to identify accounts for which you believe there is a concern about material misstatements. Use a format similar to the one in requirement d. f. Explain whether you believe the information in requirement d or e provides the most useful data for evaluating the potential for misstatements. Explain why. Answer: Using the common - size income statement provides useful data for evaluating potential for misstatements because common-size income statement displays all items as percent of common base, such as sales which is very helpful in identifying if there is any decrease/increase on each accounts. Because all the balances are percentage on the income statement and are based on the common base net sales, not the dollar amount, the common-size income statement provides us a financial picture from a different aspect not only look at the dollar amount. Due to inflation and other economics trend, we have some expectation on the increase of some accounts, e.g. cost of goods or salary, so the percentage increase of those accounts wouldn't be a sign of misstatements. However, if some account percentage changes against our expectation, then we need to look into this accounts detail and find the supporting evidence. Common-size income statements also allow us to compare each division over a different time periods, allow us to see the trends and provide insight on how each division is doing. Thus, using the common-size income statement provides useful data for evaluating potential for misstatements. g. Analyze the account balances for accounts receivable, inventory, and short/current long-term debt. Describe any observations about those accounts and discuss additional information you want to consider during the current year audit. Answer: In observing Pinnacle Manufacturing's financials it seems accounts receivable, inventory, and short/current long-term debt all had a slight increase from 2009 to 2010 and a dramatic increase from 2010 to 2011. After calculating the increases the results are as followed: Account Accounts Receivable Inventory Short/Current Long-Term Debt 2009-2010 Increase 8.61% 1.05% 2010-2011 increase 51.30% 26.23% 6.47% 49.30% As a new auditor, observing the inner workings of this company would be a great way to start. Then, with the drastic increases in the financial statements, I would have to take into account that Solar-Electro has recently become a second division. This division is also a new wave technology that has an anticipated high profit margin. Also, Machine-Tech, a third division, has recently been added to Pinnacle. These additions could definitely account for the percentage increases in financials. However, I would like to look at each division's individual financials to ensure they are complicit with Pinnacle Manufacturing's financial statements as a whole. h. Based on your calculations, assess the likelihood (high, medium, or low) that Pinnacle is likely to fail financially in the next 12 months