Chapter 13, Problem 13.5E

a)

To determine

Horizontal Analysis and Vertical Analysis

Horizontal Analysis: Horizontal analysis is prepared to make comparison between the financial statements to determine the changes in the financial statements for the previous year to the current year. The changes of the company are measured in dollars as well as in percentage.

Formula:

$\text{Percentage Change}=100\times \frac{\text{Later Period}\text{Amount}-\text{Base}\text{Period Amount}}{\text{Base Period Amount}}$

Vertical Analysis: Vertical analysis is prepared to analyze the relationship among various financial statements with a particular base amount. Use the following formula to calculate vertical analysis percentage:

Formula:

$\text{Vertical analysis percentage }=\left(\frac{\text{Specific item}}{\text{Base}\text{amount}}\right)\times 100$

This analysis is otherwise called as common-size statement.

To prepare: Horizontal analysis of Corporation N’s Comparative Balance Sheets data for 2016 and 2017.

b)

To determine

To prepare: Vertical analysis of Corporation N’s comparative condensed balance sheet data for 2017.