Question

Rotorua Products, Ltd., of New Zealand markets agricultural products for the burgeoning Asian consumer market. The company’s current assets, current liabilities, and sales over the last five years (Year 5 is the most recent year) are as follows:
Year 1 Year 2 Year 3 Year 4 Year 5
Sales $ 4,539,770 $ 4,898,400 $ 5,083,390 $ 5,492,990 $ 5,796,610
Cash $ 80,701 $ 106,917 $ 90,847 $ 72,725 $ 76,958
Accounts receivable, net 418,624 430,931 448,168 501,061 572,699
Inventory 800,711 867,178 834,459 880,216 909,440
Total current assets $ 1,300,036 $ 1,405,026 $ 1,373,474 $ 1,454,002 $ 1,559,097
Current liabilities $ 316,539 $ 343,508 $ 328,340 $ 333,975 $ 405,136

Required:

1. Express all of the asset, liability, and sales data in trend percentages. Use Year 1 as the base year. (Round your percentage answers to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)

Answer 1

Answer:

Trend Analysis helps to interpret the changes in account balances over certain period of time. Trends in percentages is presented in the table below.

* Excel solution is attached for your reference.

Explanation:

For Rotorua Product Ltd, data trends (in percentages) can be computed using the following formula:

                       Trend in % = (Current Year ÷ Base Year) × 100

                          where: Base Year is assumed to be Year 1

                                      Year 1 Year 2  Year 3   Year 4     Year 5

Sales                                 100.0% 107.9%     112.0%   121.0%     127.7%

     

Current Assets    

Cash                                   100.0% 132.5%   112.6%     90.1%      95.4%

Accounts receivable, net   100.0% 102.9%   107.1%     119.7%      136.8%

Inventory                           100.0% 108.3%   104.2%     109.9%     113.6%

Total current assets           100.0%  108.1%    105.6%     111.8%      119.9%

     

Current liabilities                   100.0% 108.5%   103.7%     105.5%      128.0%

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