Neptune Ltd. has the following information available for 2011 and 2012: Converting the 2012 column into a common-size statement would show current assets as being:
A) 60 percent higher than 2011 current assets.
B) 67 percent of 2012 total assets.
C) 71 percent of 2011 total assets.
D) 50 percent higher than 2012 long-term assets.

Question

Neptune Ltd. has the following information available for 2011 and 2012:  Converting the 2012 column into a common-size statement would show current assets as being:
A) 60 percent higher than 2011 current assets. 
B) 67 percent of 2012 total assets. 
C) 71 percent of 2011 total assets. 
D) 50 percent higher than 2012 long-term assets.

Quizplus · Accepted Answer

A common-size statement expresses each item as a percentage of a common base. In this case, we would use total assets as the common base. Therefore, to calculate the common-size percentage for current assets in 2012, we would divide current assets in 2012 by total assets in 2012 and multiply by 100.

Common-size percentage for current assets in 2012 = (Current assets 2012 / Total assets 2012) * 100
= (1,080,000 / 1,615,000) * 100
= 66.92%

Thus, current assets were 66.92% of total assets in 2012.