answer the following

Case Study 1

The balance sheet and income statement for ABC Company for the years 2015 and 2016 are as follows:

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BALANCE SHEET 2015 2016

Cash $ 460 $ 300

Accounts receivable 620 480

Inventory 1,000 730

Total assets $2,080 $1,510

Accounts payable $580 $310

Notes payable 500 100

Common stock 400 400

Retained earnings 600 700

Total liabilities and $2,080 $1,510

stockholders’ equity

Income Statement

Net sales $550 $840

Cost of goods sold 120 160

Gross margin $430 $680

Expenses:

Salaries $ 100 $150

Warehousing costs 80 120

Advertising 60 90

Taxes 45 75

Total expenses $285 $435

Net income $145 $245

Questions

1. Perform vertical and/or horizontal analysis of the statements and identify two things that appear to be unusual and could be possible symptoms of fraud.

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