Multiple Choice
Which of the following is NOT included in a statement of comprehensive income?
4. Merchandising Operations
Comprehensive Income
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On a common-sized balance sheet, how is the current year's long-term debt typically presented?
A
As a percentage of total assets
B
As a percentage of net income
C
As a percentage of total equity
D
As a percentage of total revenues
Verified step by step guidance1
Understand the concept of a common-sized balance sheet: A common-sized balance sheet expresses each item as a percentage of a base amount, typically total assets, to allow for easy comparison across companies or time periods.
Identify the base amount used for comparison: In a common-sized balance sheet, the base amount is total assets, as it provides a comprehensive view of the company's financial position.
Determine how long-term debt is presented: Long-term debt is expressed as a percentage of total assets to show its proportion relative to the company's overall financial resources.
Eliminate incorrect options: The other options (percentage of net income, total equity, or total revenues) are not relevant for a common-sized balance sheet, as they do not align with the standard practice of using total assets as the base.
Conclude that the correct presentation of long-term debt on a common-sized balance sheet is as a percentage of total assets.
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