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1. Problem 12-89B Preparing Common Size Statements

   The financial statements for Richardson Socks Company follow.

   Richardson Socks Company Consolidated Income Statements (in thousands, except per share data)
   	Year ended December 31,
   	2019		2018		2017
   Revenues	$4,102,721		$3,652,412		$3,178,569
   Costs and expenses:
   Cost of goods sold	$2,256,236		$2,234,985		$1,952,123
   Selling and administrative	927,412		653,986		598,236
   Interest	23,974		32,596		31,853
   Other expenses (income)	1,925		2,254		(102)
   Total costs and expenses	$3,209,547		$2,923,821		$2,582,110
   Income before income taxes	$ 893,174		$ 728,591		$ 596,459
   Income taxes	247,692		183,456		163,524
   Net income	$ 645,482		$ 545,135		$ 432,935

   Richardson Socks Company Consolidated Balance Sheets (in thousands)
   	December 31,
   ASSETS	2019		2018
   Current assets:
   Cash and equivalents	$ 301,695		$ 269,648
   Accounts receivable, less allowance for doubtful accounts of $20,568 and $18,322	670,469		604,236
   Inventories	601,396		469,582
   Deferred income taxes	23,415		24,397
   Prepaid expenses	43,624		36,478
   Total current assets	$1,640,599		$1,404,341
   Property, plant, and equipment	$ 583,152		$ 501,239
   Less accumulated depreciation	(206,452)		(148,231)
   Net property, plant, and equipment	$ 376,700		$ 353,008
   Goodwill	162,325		127,695
   Other assets	29,158		23,598
   Total assets	$2,208,782		$1,908,642
   LIABILITIES AND STOCKHOLDERS EQUITY
   Current liabilities:
   Current portion of long-term debt	$63,169		$5,665
   Notes payable	112,596		110,423
   Accounts payable	128,696		139,364
   Accrued liabilities	143,874		133,569
   Income taxes payable	23,541		38,972
   Total current liabilities	$471,876		$427,993
   Long-term debt	16,254		83,456
   Noncurrent deferred income taxes	33,489		31,238
   Other noncurrent liabilities	46,685		27,434
   Commitments and contingencies	0		0
   Redeemable preferred stock	200		200
   Total liabilities	$568,504		$570,321
   Stockholders equity:
   Common stock at stated value:
   Class A convertible27,723 and 25,832 shares outstanding	$164		$175
   Class B49,756 and 47,652 shares outstanding	3,152		3,120
   Capital in excess of stated value	110,596		96,546
   Treasury stock (common at cost)	(8,741)		(7,859)
   Retained earnings	1,535,107		1,246,339
   Total stockholders equity	$1,640,278		$1,338,321
   Total liabilities and stockholders equity	$2,208,782		$1,908,642

   Required:

   1. Prepare common size income statements to be used for horizontal analysis for Richardson for 2017 and 2019 (in percentage terms, rounded to two decimal places). Utilize 2017 as the base year for both 2018 and 2019. You do not need to include the actual dollar amounts shown above.

   Richardson Socks Company
   Consolidated Income Statements
   For the Year ended:
   	December 31, 2019	December 31, 2018	December 31, 2017
   Revenues	%	%	%
   Costs and expenses:
   Cost of goods sold	%	%	%
   Selling and administrative	%	%	%
   Interest	%	%	%
   Other expenses (income)	%	%	%
   Total costs and expenses	%	%	%
   Income before income taxes	%	%	%
   Income taxes	%	%	%
   Net income	%	%	%

   Feedback

   2. Prepare common size balance sheets to be used for vertical analysis for 2019 and 2018 (in percentage terms, rounded to two decimal places). Percentages may not calculate down because of rounding. You do not need to include the actual dollar amounts shown above. If an answer box does not require an entry enter "0".

   Richardson Socks Company
   Consolidated Balance Sheet
   ASSETS	December 31, 2019	December 31, 2018
   Current assets:
   Cash and equivalents	%	%
   Accounts receivable, less allowance for doubtful accounts of $20,568 and $18,322	%	%
   Inventories	%	%
   Deferred income taxes	%	%
   Prepaid expenses	%	%
   Total current assets	%	%
   Property, plant, and equipment	%	%
   Less accumulated depreciation	%	%
   Net property, plant, and equipment	%	%
   Goodwill	%	%
   Other assets	%	%
   Total assets	%	%
   LIABILITIES AND STOCKHOLDERS' EQUITY	December 31, 2019	December 31, 2018
   Current liabilities:
   Current portion of long-term debt	%	%
   Notes payable	%	%
   Accounts payable	%	%
   Accrued liabilities	%	%
   Income taxes payable	%	%
   Total current liabilities	%	%
   Long-term debt	%	%
   Noncurrent deferred income taxes	%	%
   Other noncurrent liabilities	%	%
   Commitments and contingencies	%	%
   Redeemable preferred stock	%	%
   Total liabilities	%	%
   Stockholders' equity:
   Common stock at stated value:
   Class A convertible-27,723 and 25,832 shares outstanding	%	%
   Class B-49,756 and 47,652 shares outstanding	%	%
   Capital in excess of stated value	%	%
   Treasury stock (common at cost)	%	%
   Retained earnings	%	%
   Total stockholders' equity	%	%
   Total liabilities and stockholders' equity	%	%

   Feedback

   3. Determine whether the proportion of dollars invested in the various categories of assets has changed significantly between 2018 and 2019.

   • Increased
   • Decreased
   • No significant change

   4. Determine whether the proportion of capital raised from the various liability categories and common stockholders equity has changed significantly between 2018 and 2019.

   • Increased
   • Decreased
   • No significant change

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