
(a)
Common size analysis can be led in two different ways, i.e., vertical analysis and horizontal analysis. Vertical analysis alludes to the analysis of explicit details in connection to a base thing inside the equivalent money related period. For instance, in a critical position sheet, we can survey the extent of stock.
To discuss:
Prepare common size income statement to be used for horizontal analysis for Burch 2017 to 2019. Utilize 2017 as the base year for 2018 and 2019.

Answer to Problem 89PSA
Burch Industries
Common size for income statement ( horizontal)
Particular | 2019 | 2018 | 2017 |
Revenues | 130.88 | 113.37 | 100.00 |
Costs and expenses: | |||
Cost of goods sold | 128.99 | 112.89 | 100.00 |
Selling and administrative | 138.88 | 114.67 | 100.00 |
Interest | 94.23 | 112.26 | 100.00 |
Other expenses (income) | -3430.23 | -4979.07 | 100.00 |
Total costs and expenses | 131.26 | 113.44 | 100.00 |
Income before income taxes | 128.75 | 113.01 | 100.00 |
Income taxes | 131.37 | 110.25 | 100.00 |
Net income | 127.16 | 114.69 | 100.00 |
Explanation of Solution
In this calculation 1 formula is used
For 2019 year =
For 2018 year =
(b)
Net income increase shows that what types of effect in the income statement, so increase the net income.
To discuss:
Why net income percentage increase from 2017 to 2019.

Answer to Problem 89PSA
There are some reasons for increase net income
- Increase the sale from 2017 to 2019.
- Cost of goods increase but less increase in the comparison with sale amount.
- Decrease the interest cost from 2017 to 2019.
- Increase the selling expense that why increase the sale volume then increase the net income.
Explanation of Solution
- Other expense increase is very high amount.
- Increase the sale from 2017 to 2019.
- Cost of goods increase but less increase in the comparison with sale amount.
- Decrease the interest cost from 2017 to 2019.
- Increase the selling expense that why increase the sale volume then increase the net income.
(c)
To discuss:
Prepare common size statement of balance sheet to be used vertical analysis for 2018 and 2019.

Answer to Problem 89PSA
Common size statement (vertical)
Balance sheet
Particular | 2019 | 2018 | 2019 | 2018 |
ASSETS | ||||
Current assets | ||||
Cash and equivalents S | 291,284 | 260,050 | 13.32 | 13.89 |
667,547 | 596,018 | 30.52 | 31.82 | |
Inventories | 592,986 | 471,202 | 27.11 | 25.16 |
26,378 | 27,511 | 1.21 | 1.47 | |
Prepaid expenses | 42,452 | 32,977 | 1.94 | 1.76 |
Total current assets | 1,620,647 | $1,387,758 | 74.09 | 74.10 |
Net property, plant, and equipment | 377,995 | 346,037 | 17.28 | 18.48 |
157,894 | 110,363 | 7.22 | 5.89 | |
Other assets | 30,927 | 28,703 | 1.41 | 1.53 |
Total assets | $2,187,463 | 1,872,861 | 100.00 | 100.00 |
LIABILITIES AND |
||||
Current liabilities: | ||||
Current portion of long-term debt | $52,985 | $3,652 | 2.42 | 0.19 |
Notes payable | 108,165 | 105,696 | 4.94 | 5.64 |
Accounts payable | 135,701 | 134,729 | 6.20 | 7.19 |
Accrued liabilities | 138,563 | 134,089 | 6.33 | 7.16 |
Income taxes payable | 17,150 | 42,422 | 0.78 | 2.27 |
Total current liabilities | $452,564 | $420,588 | 20.69 | 22.46 |
Long-term debt | 15,033 | 77,022 | 0.69 | 4.11 |
Noncurrent deferred income taxes | 29,965 | 27,074 | 1.37 | 1.45 |
Other noncurrent liabilities | 43,575 | 23,728 | 1.99 | 1.27 |
Commitments and contingencies | 0 | 0 | 0.00 | 0.00 |
Redeemable |
300 | 300 | 0.01 | 0.02 |
Total liabilities | $541,437 | $548,712 | 24.75 | 29.30 |
Stockholders' equity: | ||||
Common stock at stated value: | ||||
Class A convertible-26,691 and 26,919 shares outstanding | $159 | $161 | 0.01 | 0.01 |
Class B-49,161 and 48,591 shares outstanding | 2,720 | 2,716 | 0.12 | 0.15 |
Capital in excess of stated value | 108,451 | 93,799 | 4.96 | 5.01 |
-7,790 | -6,860 | -0.36 | -0.37 | |
1,542,486 | 1,234,333 | 70.51 | 65.91 | |
Total stockholders' equity | $1,646,026 | $1,324,149 | 75.25 | 70.70 |
Total liabilities and stockholders' equity | $2,187,463 | $1,872,861 | 100.00 | 100.00 |
Explanation of Solution
Formula used in the vertical common size balance sheet statement
For 2018 =
For 2019 =
(d)
Balance sheet is the main statement of any business which shows the real figure of particular company, and after the company balance sheet company can analysis of any types like debt to equity ratio any many more.
Company also identity that how much company invest in the different types of assets.
To discuss:
Indicate whether the proportion of dollars invested in the various categories of assets has changed significantly between 2018 to 2019.

Answer to Problem 89PSA
Particular | 2019 ($) | 2018 ($) | Difference | Percentage |
ASSETS | 2019-2018 | |||
Current assets | ||||
Cash and equivalents | 291,284 | 260,050 | 31234 | 12.01 |
Accounts receivable | 667,547 | 596,018 | 71529 | 12.00 |
Inventories | 592,986 | 471,202 | 121784 | 25.85 |
Deferred income taxes | 26,378 | 27,511 | -1133 | -4.12 |
Prepaid expenses | 42,452 | 32,977 | 9475 | 28.73 |
Total current assets | 1,620,647 | $1,387,758 | 232889 | 16.78 |
Net property, plant, and equipment | 377,995 | 346,037 | 31958 | 9.24 |
Goodwill | 157,894 | 110,363 | 47531 | 43.07 |
Other assets | 30,927 | 28,703 | 2224 | 7.75 |
Total assets | $2,187,463 | 1,872,861 | 314602 | 16.80 |
Explanation of Solution
Particular | 2019 | 2018 | 2019 | 2018 |
ASSETS | ||||
Current assets | ||||
Cash and equivalents S | 291,284 | 260,050 | 13.32 | 13.89 |
Accounts receivable | 667,547 | 596,018 | 30.52 | 31.82 |
Inventories | 592,986 | 471,202 | 27.11 | 25.16 |
Deferred income taxes | 26,378 | 27,511 | 1.21 | 1.47 |
Prepaid expenses | 42,452 | 32,977 | 1.94 | 1.76 |
Total current assets | 1,620,647 | $1,387,758 | 74.09 | 74.10 |
Net property, plant, and equipment | 377,995 | 346,037 | 17.28 | 18.48 |
Goodwill | 157,894 | 110,363 | 7.22 | 5.89 |
Other assets | 30,927 | 28,703 | 1.41 | 1.53 |
Total assets | $2,187,463 | 1,872,861 | 100.00 | 100.00 |
Difference amount = amount of 2019 − Amount of 2018Percentage =
(e)
Capital raised means company taking some amount of borrowing for the purpose of increase the profit amount also increase the company manufacturing or production.
To discuss:
How much amount of capital raised from the various categories of assets has changed significantly between 2018 to 2019.

Answer to Problem 89PSA
Stockholders' equity: | 2019 | 2018 | Difference | Precentage |
Common stock at stated value: | ||||
Class A convertible-26,691 and 26,919 shares outstanding | $159 | $161 | -2 | -1.24 |
Class B-49,161 and 48,591 shares outstanding | 2,720 | 2,716 | 4 | 0.15 |
Capital in excess of stated value | 108,451 | 93,799 | 14652 | 15.62 |
Treasury stock (common at cost) | -7,790 | -6,860 | -930 | 13.56 |
Retained earnings | 1,542,486 | 1,234,333 | 308153 | 24.97 |
Total stockholders' equity | $1,646,026 | $1,324,149 | 321877 | 24.31 |
Explanation of Solution
Difference amount = amount of 2019 − Amount of 2018
Percentage =
(f)
An organization’s balance sheet, otherwise called an "announcement of financial position," uncovers the company’s assets, liabilities and owners' equity (total assets). The balance sheet, together with the salary proclamation and income explanation, make up the foundation of any organization’s financial.
To discuss:
Discuss the financial statement.

Answer to Problem 89PSA
The company is in very good position, there are some information about the income statement and from the balance sheet:
- Sale volume has increase
- Profit also increase
- Current assets increase from 2018 to 2019
- Fixed assets purchase by the company for the production.
- Total fixed assets increase.
- Goodwill purchase
- Company repayment the long-term debt
- Company purchase own share from the market
- Company increase the retained earning
- Reduce the income tax payable.
Explanation of Solution
The organization is in excellent position, there are some data about the pay explanation and from the balance sheet:
1.Sale volume has increment
2.Profit additionally increment
3.Current assets increment from 2018 to 2019
4.Fixed assets buy by the organization for the generation.
5.Total fixed assets increment.
6.Goodwill buy
7.Company reimbursement the long haul obligation
8.Company buy possess share from the market
9.Company increment the held procuring
10.Reduce the pay charge payable.
Want to see more full solutions like this?
Chapter 12 Solutions
Cornerstones of Financial Accounting
- incoporate the accounting conceptual frameworksarrow_forwarda) Define research methodology in the context of accounting theory and discuss the importance of selecting appropriate research methodology. Evaluate the strengths and limitations of quantitative and qualitative approaches in accounting research. b) Assess the role of modern accounting theories in guiding research in accounting. Discuss how contemporary theories, such as stakeholder theory, legitimacy theory, and behavioral accounting theory, shape research questions, hypotheses formulation, and empirical analysis. Question 4 Critically analyse the role of financial reporting in investment decision-making, emphasizing the qualitative characteristics that enhance the usefulness of financial statements. Discuss how financial reporting influences both investor confidence and regulatory decisions, using relevant examples.arrow_forwardFastarrow_forward
- CODE 14 On August 1, 2010, Cheryl Newsome established Titus Realty, which completed the following transactions during the month: a. Cheryl Newsome transferred cash from a personal bank account to an account to be used for the business in exchange for capital stock, $25,000. b. Paid rent on office and equipment for the month, $2,750. c. Purchased supplies on account, $950. d. Paid creditor on account, $400. c. Earned sales commissions, receiving cash, $18,100. f. Paid automobile expenses (including rental charge) for month, $1,000, and miscel- laneous expenses, $600. g. Paid office salaries, $2,150. h. Determined that the cost of supplies used was $575. i. Paid dividends, $2,000. REQUIREMENTS: 1. Determine increase - decrease of each account and new balance 2. Prepare 3 F.S: Income statement; Retained Earnings Statement; Balance Sheet Scanned with CamScannerarrow_forwardAssume that TDW Corporation (calendar-year-end) has 2024 taxable income of $952,000 for purposes of computing the §179 expense. The company acquired the following assets during 2024: (Use MACRS Table 1, Table 2, Table 3, Table 4, and Table 5.) Asset Machinery Computer equipment Furniture Total Placed in Service September 12 February 10 April 2 Basis $ 2,270,250 263,325 880,425 $ 3,414,000 b. What is the maximum total depreciation, including §179 expense, that TDW may deduct in 2024 on the assets it placed in service in 2024, assuming no bonus depreciation? Note: Round your intermediate calculations and final answer to the nearest whole dollar amount. Maximum total depreciation deduction (including §179 expense)arrow_forwardEvergreen Corporation (calendar-year-end) acquired the following assets during the current year: (Use MACRS Table 1 and Table 2.) Date Placed in Asset Machinery Service October 25 Original Basis $ 120,000 Computer equipment February 3 47,500 Used delivery truck* August 17 Furniture April 22 60,500 212,500 The delivery truck is not a luxury automobile. Note: Do not round intermediate calculations. Round your answers to the nearest whole dollar amount. b. What is the allowable depreciation on Evergreen's property in the current year if Evergreen does not elect out of bonus depreciation and elects out of §179 expense?arrow_forward
- Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningPrinciples of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax CollegeFinancial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage Learning
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage LearningExcel Applications for Accounting PrinciplesAccountingISBN:9781111581565Author:Gaylord N. SmithPublisher:Cengage Learning



