502 Chapter 12 Financial Statements
Formatting becomes an issue, though, since we are already pressed for space listing the
assets next to the liabilities and equity. Adding additional columns would be impossible to
reasonably do on a normal 8.5 1 1-inch sheet of paper. It is common practice, therefore,
to list the assets above the liabilities and equity. This loses the visual “balance” of listing
them next to each other, which is unfortunate, but is necessary.
It is also common, again for the sake of space, to forego putting the subcategory and cate-
gory total amounts in separate columns. An underline is placed below the last amount before a
total is taken, though, so category totals can be quickly found by looking for the underlines.
The following examples will illustrate.
Example 12.2.5 Complete a vertical analysis balance sheet for Hilbert Hotels as of
December 31, 2007.
To do this, we fi rst realign the spreadsheet as discussed above. Then, we add a column for
percent. Since each item will be expressed as a percent of the total assets (or total liabilities
and equity), we fi nd these percents by dividing. For example, we fi nd the percent for cash by
dividing $527,500/$9,178,479 5.75%.
We continue through the balance sheet, dividing each amount by $9,178,479 to fi nd the
percent. The result is:
Hilbert Hotel Company
Balance Sheet as of December 31, 2007
Assets Amount Percent
Current assets:
Cash $527,500 5.75%
Accounts receivable $245,904 2.68%
Prepaid expenses $425,000 4.63%
To tal current assets $1,198,404 13.06%
Property, plant, and equipment:
Buildings $4,505,075 49.08%
Land $725,000 7.90%
Other plant and equipment $2,750,000 29.96%
To tal P, P, and E $7,980,075 86.94%
Total assets $9,178,479 100.00%
Liabilities Amount Percent
Current liabilities:
Accounts payable $404,029 4.40%
Note due May 1, 2008 $300,000 3.27%
Salaries payable $125,055 1.36%
To tal current liabilities $829,084 9.03%
Long-term liabilities:
Mortgage notes $3,725,000 40.58%
Other long-term debt $525,000 5.72%
To tal long-term liabilities $4,250,000 46.30%
To tal liabilities $5,079,084 55.34%
Equity Amount Percent
Contributed capital $750,000 8.17%
Retained earnings $3,349,395 36.49%
To tal equity $4,099,395 44.66%
Total liabilities and equity $9,178,479 100.00%
Example 12.2.6 The balance sheet for Hilbert Hotels as of December 31, 2006,
is given below. Use this, together with the December 31, 2007, balance sheet given
previously, to complete a horizontal analysis comparing 2007 to 2006.