Prepare common-sized financial statements for Leslie Fay for the period 1987 1991. For that same period, compute for Leslie Fay the ratios shown in Exhibit 2. Given these data, which financial statement items do you believe should have been of particular interest to BDO Seidman during that firms 1991 audit of Leslie Fay? Explain

Please show step by step how to prepare the common sized financial statements

\begin{tabular}{|c|c|c|c|c|c|} \hline \multicolumn{6}{|c|}{\begin{tabular}{l} The Leslie Fay Companies \\ Consolidated Income Statements 1987-1991 \\ (in millions) \end{tabular}} \\ \hline & 1991 & 1990 & 1989 & 1988 & 1987 \\ \hline Net Sales & $836.6 & $858.8 & $786.3 & $682.7 & $582.0 \\ \hline Cost of Sales & 585.1 & 589.4 & 536.8 & 466.3 & 403.1 \\ \hline Gross Profit & 251.5 & 269.4 & 249.5 & 216.4 & 178.9 \\ \hline \multicolumn{6}{|l|}{ Operating Expenses: } \\ \hline \multicolumn{6}{|l|}{ Selling, Warehouse, General and } \\ \hline Administrative & 186.3 & 199.0 & 183.8 & 156.2 & 132.5 \\ \hline Amortization of Intangibles & 2.7 & 2.9 & 2.6 & 3.3 & 3.8 \\ \hline Total Operating Expenses & 189.0 & 201.9 & 186.4 & 159.5 & 136.3 \\ \hline Operating Income & 62.5 & 67.5 & 63.1 & 56.9 & 42.6 \\ \hline Interest Expense & 18.3 & 18.7 & 19.3 & 18.2 & 16.4 \\ \hline \begin{tabular}{l} Income Before Non-recurring Cha \\ (Credits) \end{tabular} & 44.2 & 48.8 & 43.8 & 38.7 & 26.2 \\ \hline Non-recurring Charges (Credits) & - & - & - & - & (5.0) \\ \hline Income Before Taxes on Income & 44.2 & 48.8 & 43.8 & 38.7 & 31.2 \\ \hline Income Taxes & 14.8 & 19.7 & 18.0 & 16.4 & 11.5 \\ \hline Net Income & $29.4 & $29.1 & $25.8 & $22.3 & $19.7 \\ \hline Net Income per Share & $1.55 & $1.53 & $1.35 & $$1.17 & $1.03 \\ \hline \end{tabular} \begin{tabular}{|c|c|c|c|c|c|} \hline \multirow[b]{2}{*}{ ASSETS } & \begin{tabular}{l} slie Fay Co \\ Balance Sh \\ (in million \end{tabular} & \begin{tabular}{l} npanies \\ ets 1987 \\ ) \end{tabular} & 1991 & \multirow[b]{2}{*}{1988} & \multirow[b]{2}{*}{1987} \\ \hline & 1991 & 1990 & 1989 & & \\ \hline Current Assets: & & & & & + \\ \hline Cash & $4.7 & $4.7 & $5.5 & $5.5 & $4.1 \\ \hline Receivables (net) & 118.9 & 139.5 & 117.3 & 109.9 & 82.9 \\ \hline Inventories & 126.8 & 147.9 & 121.1 & 107.0 & 83.0 \\ \hline \multicolumn{6}{|l|}{ Prepaid Expenses \& Other Current } \\ \hline Assets & 19.7 & 22.5 & 19.5 & 16.4 & 15.9 \\ \hline Total Current Assets & 270.1 & 314.6 & 263.4 & 238.8 & 185.9 \\ \hline Property, Plant, and Equipment & 39.2 & 30.0 & 27.2 & 25.9 & 24.1 \\ \hline Goodwill & 81.3 & 88.1 & 91.2 & 94.1 & 90.3 \\ \hline Deferred Charges and 0ther Assets & 5.2 & 6.2 & 5.5 & 4.2 & 5.1 \\ \hline Total Assets & $395.8 & $438.9 & $387.3 & $363.0 & $305.4 \\ \hline \multirow{2}{*}{\multicolumn{6}{|c|}{\begin{tabular}{l} LIABILITIES AND STOCKHOLDERS' EQUITY \\ Current Liabilities: \end{tabular}}} \\ \hline & & & & & \\ \hline Notes Payable & 35.0 & 48.0 & 23.0 & 29.0 & 15.5 \\ \hline Current Maturities of Long-term Debt & .3 & .3 & .3 & .3 & 1.4 \\ \hline Accounts Payable & 31.9 & 43.3 & 38.6 & 45.6 & 31.6 \\ \hline Accrued Interest Payable & 3.0 & 3.8 & 4.1 & 3.9 & 3.7 \\ \hline Accrued Compensation & 16.9 & 14.9 & 19.5 & 16.6 & 10.6 \\ \hline Accrued Expenses \& Other & 4.3 & 6.4 & 5.8 & 7.2 & 7.4 \\ \hline Income Taxes Payable & 1.4 & 2.3 & 4.6 & 6.1 & 1.8 \\ \hline Total Current Liabilities & 92.8 & 119.0 & 95.9 & 108.7 & 72.0 \\ \hline Long-term Debt & 84.4 & 129.7 & 129.0 & 116.3 & 116.6 \\ \hline \multicolumn{6}{|l|}{ Deferred Credits \& Other Noncurrent } \\ \hline Liabilities & 2.8 & 2.6 & 2.7 & 4.2 & 4.9 \\ \hline \multicolumn{6}{|l|}{ Stockholders' Equity: } \\ \hline Common Stock & 20.0 & 20.0 & 20.0 & 20.0 & 20.0 \\ \hline Capital in Excess of Par Value & 82.2 & 82.2 & 82.1 & 82.2 & 82.2 \\ \hline Retained Earnings & 156.9 & 127.6 & 98.5 & 72.8 & 50.5 \\ \hline Other & (34.3) & (31.5) & (31.9) & (32.0) & (31.7) \\ \hline Treasury Stock & (9.0) & (10.7) & (9.0) & (9.1) & (9.1) \\ \hline Total Stockholders' Equity & 215.8 & 187.6 & 159.7 & 133.8 & 111.9 \\ \hline \multicolumn{6}{|l|}{ Total Liabilities and } \\ \hline Stockholders' Equity & $395.8 & $438.9 & $387.3 & $363.0 & $305.4 \\ \hline \end{tabular} libit 2 The Leslie Fay Companies, 1991 Industry Norms for Key Financial Ratios