The balance sheet and income statement for ABC Company for the years 2015 and 2016 are as follows:Question1. 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.2. explain horizontal/vertical analysis BALANCE SHEETCashAccounts receivableInventoryTotal assetsAccounts payableNotes payableCommon stockRetained earningsTotal liabilities andstockholders' equityIncome StatementNet salesCost of goods soldGross marginExpenses:SalariesWarehousing costsAdvertisingTaxesTotal expensesNet income2015$ 4606201,000$2,080$ 580500400600$2,080$ 550120$ 430$ 100806045$ 285$ 1452016$ 300480730$1,510$ 310100400700$1,510$ 840160$ 680$ 1501209075$ 435$ 245

Fraud seems to be purposefully dishonest behaviour in order to obtain an advantage or earn a profit.…

Answered: 1. Perform vertical and/or horizontal…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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

Question

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.

2. explain horizontal/vertical analysis

BALANCE SHEET
Cash
Accounts receivable
Inventory
Total assets
Accounts payable
Notes payable
Common stock
Retained earnings
Total liabilities and
stockholders' equity
Income Statement
Net sales
Cost of goods sold
Gross margin
Expenses:
Salaries
Warehousing costs
Advertising
Taxes
Total expenses
Net income
2015
$ 460
620
1,000
$2,080
$ 580
500
400
600
$2,080
$ 550
120
$ 430
$ 100
80
60
45
$ 285
$ 145
2016
$ 300
480
730
$1,510
$ 310
100
400
700
$1,510
$ 840
160
$ 680
$ 150
120
90
75
$ 435
$ 245

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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