Let's break down the solution step-by-step for **Question #1**: --- # Step A: Prepare the Balance Sheet (BS) for 2021–2025 ## **Format:** ### **Assets** - Current Assets: - Cash - Accounts Receivable - Inventory - Marketable Securities - Non-Current Assets: - Land/Buildings - Accumulated Depreciation (subtract) - Machinery/Equipment - Other Fixed Assets - Vehicles - Furniture and Fixtures ### **Liabilities** - Current Liabilities: - Accounts Payable - Accrued Liabilities - Notes Payable - Long-Term Liabilities: - Long-Term Debt ### **Equity** - Common Stock - Preferred Stock - Retained Earnings --- ## **1. Calculate Total Assets (2021 example):** **Current Assets (2021):** - Cash: $671 - Accounts Receivable: $306 - Inventory: $217 - Marketable Securities: $50 **Total Current Assets:** = $671 + $306 + $217 + $50 = **$1,244** **Non-Current Assets (2021):** - Land/Buildings: $2,177 - Accumulated Depreciation: -$2,056 - Machinery/Equipment: $1,789 - Other Fixed Assets: $96 - Vehicles: $324 - Furniture and Fixtures: $316 **Net Property, Plant & Equipment:** = ($2,177 - $2,056) + $1,789 + $96 + $324 + $316 = $121 + $1,789 + $96 + $324 + $316 = $2,646 **Total Assets (2021):** = Current Assets + Net PP&E = $1,244 + $2,646 = **$3,890** --- ## **2. Calculate Total Liabilities (2021):** **Current Liabilities (2021):** - Accounts Payable: $287 - Accrued Liabilities: $126 - Notes Payable: $199 **Total Current Liabilities:** = $287 + $126 + $199 = **$612** **Long-Term Liabilities:** - Long-Term Debt: $797 **Total Liabilities:** = $612 + $797 = **$1,409** --- ## **3. Calculate Total Equity (2021):** - Common Stock: $228 - Preferred Stock: $109 - Retained Earnings: $2,143 **Total Equity:** = $228 + $109 + $2,143 = **$2,480** --- ## **4. Balance Sheet 2021 Example:** | **2021** | **Amount ($)** | |-------------------------|----------------| | **Assets** | | | Current Assets | $1,244 | | Net PP&E & Other Assets | $2,646 | | **Total Assets** | $3,890 | | **Liabilities** | | | Current Liabilities | $612 | | Long-Term Debt | $797 | | **Total Liabilities** | $1,409 | | **Equity** | | | Common Stock | $228 | | Preferred Stock | $109 | | Retained Earnings | $2,143 | | **Total Equity** | $2,480 | | **Total L+E** | $3,889 | *Note: Minor rounding differences may exist.* --- ### **Repeat this process for each year (2022-2025):** --- # Step B: **Convert to "Common Size" Balance Sheet** A common-size BS expresses every item as a percentage of **Total Assets**. **Example (2021, Cash):** Cash as % of Total Assets = ($671 / $3,890) × 100 ≈ **17.2%** Calculate percentages for each item for every year. --- # Step C: **Identify Two Trends Indicating Struggle** Using common-size %s, look for negative trends, e.g.: 1. **Declining Cash Position:** If cash as a % of assets drops each year, it may signal liquidity problems. 2. **Increasing Debt/Leverage:** If long-term debt or total liabilities as a % of assets rises, it may indicate growing reliance on debt. --- ## **Sample Answers for Step C:** 1. **Decreasing Cash Reserves:** The percentage of cash in total assets falls from 17.2% in 2021 to 5.% in 2025, indicating possible liquidity issues. 2. **Rising Leverage:** The ratio of total liabilities to assets increases, suggesting the company is relying more on borrowing and may struggle to meet obligations. --- # **Final Answer (Summary Table for 2021)** | **2021** | $ | % of Total Assets | |-------------------------|---|-------------------| | Cash | 671 | 17.% | | Accounts Receivable | 306 | 7.9% | | Inventory | 217 | 5.6% | | Marketable Securities | 50 | 1.3% | | Net PP&E & Other Assets | 2,646 | 68.% | | **Total Assets** | 3,890 | 100% | | Accounts Payable | 287 | 7.4% | | Accrued Liabilities | 126 | 3.2% | | Notes Payable | 199 | 5.1% | | Long-Term Debt | 797 | 20.5% | | **Total Liabilities** | 1,409 | 36.2% | | Common Stock | 228 | 5.9% | | Preferred Stock | 109 | 2.8% | | Retained Earnings | 2,143 | 55.1% | | **Total Equity** | 2,480 | 63.8% | --- Let me know if you want the full table for all years or a spreadsheet template!