The balance sheet and income statement for ABC Company for the years 2015 and 2016 are as follows:

Question

1. Perform vertical and/or horizontal analysis of the statements and identify two things that appear to be unusual and could be possible symptoms of fraud.

\begin{tabular}{|c|c|c|} \hline BALANCE SHEET & 2015 & 2016 \\ \hline Cash & $460 & $300 \\ \hline Accounts receivable & 620 & 480 \\ \hline Inventory & 1,000 & 730 \\ \hline Total assets & $2,080 & $1,510 \\ \hline Accounts payable & \$ 580 & $310 \\ \hline Notes payable & 500 & 100 \\ \hline Common stock & 400 & 400 \\ \hline Retained earnings & 600 & 700 \\ \hline \begin{tabular}{l} Total liabilities and \\ stockholders' equity \end{tabular} & $2,080 & $1,510 \\ \hline Income Statement & & \\ \hline Net sales & \$ 550 & $840 \\ \hline Cost of goods sold & 120 & 160 \\ \hline Gross margin & $430 & $680 \\ \hline Expenses: & & \\ \hline Salaries & $100 & $150 \\ \hline Warehousing costs & 80 & 120 \\ \hline Advertising & 60 & 90 \\ \hline Taxes & 45 & 75 \\ \hline Total expenses & $285 & $435 \\ \hline Net income & \$ 145 & $245 \\ \hline \end{tabular}