Corporate Financial Accounting
15th Edition
ISBN: 9781337398169
Author: Carl Warren, Jeff Jones
Publisher: Cengage Learning
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Question
Chapter 14, Problem 14.2BPR
To determine
Vertical Analysis
Vertical analysis is prepared to analyze the relationship among various financial statements with a particular base amount.
Formula:
This analysis is otherwise called as common-size statement.
To prepare: Comparative income statement for the two-year period.
Given info: Income statement for the two year period.
To determine
Requirement 2:
To comment: Significant relationships revealed by the horizontal analysis.
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Vertical Analysis of Income Statement
For 20Y2, Tri-Comic Company initiated a sales promotion campaign that included the expenditure of an additional $21,000 for advertising. At the end of the year, Lumi Neer, the president, is presented with the following condensed comparative income statement:
Tri-Comic CompanyComparative Income StatementFor the Years Ended December 31, 20Y2 and 20Y1
20Y2
20Y1
Sales
$741,000
$637,000
Cost of merchandise sold
348,270
337,610
Gross profit
$392,730
$299,390
Selling expenses
$148,200
$121,030
Administrative expenses
74,100
76,440
Total operating expenses
$222,300
$197,470
Income from operations
$170,430
$101,920
Other revenue
29,640
31,850
Income before income tax expense
$200,070
$133,770
Income tax expense
81,510
50,960
Net income
$118,560
$82,810
Required:
Question Content Area
1. Prepare a comparative income statement for the two-year period, presenting an analysis of each item in…
Vertical analysis of income statement
For 20Y2, Tri-Comic Company initiated a sales promotion campaign that included the expenditure of an additional $50,000 for advertising. At the end of the year, Lumi Neer, the president, is presented with the following condensed comparative income statement:
Tri-Comic Company
Comparative Income Statement
For the Years Ended December 31, 20Y2 and 20Y1
20Y2
20Y1
Sales
$ 1,500,000
$ 1,250,000
Cost of goods sold
(510,000)
(475,000)
Gross profit
$ 990,000
$ 775,000
Selling expenses
$ (270,000)
$ (200,000)
Administrative expenses
(180,000)
(156,250)
Total operating expenses
$ (450,000)
$ (356,250)
Operating income
$ 540,000
$ 418,750
Other revenue
60,000
50,000
Income before income tax expense
$ 600,000
$ 468,750
Income tax expense
(450,000)
(375,000)
Net income
$ 150,000
$ 93,750
1. Prepare a comparative income statement for the two-year period, presenting an analysis of each item in relationship to sales for…
Vertical analysis of income statement
For 20Y2, Tri-Comic Company initiated a sales promotion campaign that included the expenditure of an additional $50,000 for advertising. At the end of the year, Lumi Neer, the president, is presented with the following condensed comparative income statement:
REFER IMAGE
Instructions1. Prepare a comparative income statement for the two-year period, presenting an analysis of each item in relationship to sales for each of the years. (Round percentages to one decimal place.)2. To the extent the data permit, comment on the significant relationships revealed by the vertical analysis prepared in (1).
Chapter 14 Solutions
Corporate Financial Accounting
Ch. 14 - Briefly explain the difference between liquidity,...Ch. 14 - What is the advantage of using comparative...Ch. 14 - Prob. 3DQCh. 14 - How would the current and quick ratios of a...Ch. 14 - Prob. 5DQCh. 14 - What do the following data, taken from a...Ch. 14 - A. How does the rate earned on total assets differ...Ch. 14 - Kroger, a grocery store, recently had a...Ch. 14 - The dividend yield of Suburban Propane Partners,...Ch. 14 - Prob. 10DQ
Ch. 14 - Horizontal analysis The comparative accounts...Ch. 14 - Vertical analysis Income statement information for...Ch. 14 - Current position analysis The following items are...Ch. 14 - Accounts receivable analysis A company reports the...Ch. 14 - Inventory analysis A company reports the...Ch. 14 - Prob. 14.6BECh. 14 - To determine: Times interest earned ratio Given...Ch. 14 - Asset turnover A company reports the following:...Ch. 14 - Return on total assets A company reports the...Ch. 14 - Common stockholders profitability analysis A...Ch. 14 - Earnings per share and price-earnings ratio A...Ch. 14 - Vertical analysis of income statement Revenue and...Ch. 14 - a Current fiscal year income from continuing...Ch. 14 - Common-sized income statement Revenue and expense...Ch. 14 - Vertical analysis of balance sheet Balance shed...Ch. 14 - a. Net income increase, 78,0% Horizontal analysis...Ch. 14 - a. (1) Current year working capital. 1,090,000...Ch. 14 - Prob. 14.7EXCh. 14 - Current position analysis The bond indenture for...Ch. 14 - Accounts receivable analysis The following data...Ch. 14 - Accounts receivable analysis Xavier Stores Company...Ch. 14 - Inventory analysis The following data were...Ch. 14 - Inventory analysis QT, Inc. and Elppa Computers,...Ch. 14 - Ratio of liabilities to stockholders' equity and...Ch. 14 - Prob. 14.14EXCh. 14 - a. Mondelez International Inc., 1.4 Ratio of...Ch. 14 - a. YRC, 2.6 Asset turnover Three major segments of...Ch. 14 - Profitability ratios The following selected data...Ch. 14 - a. Year 3 return on total assets. 6.8%...Ch. 14 - Six measures of solvency or profitability The...Ch. 14 - Five measures of solvency or profitability The...Ch. 14 - Earnings per share, price-earnings ratio, dividend...Ch. 14 - a. Alphabet, 37.9 Price-earnings ratio; dividend...Ch. 14 - Earnings per share, discontinued operations The...Ch. 14 - Prob. 14.24EXCh. 14 - Unusual items Explain whether Colston Company...Ch. 14 - Comprehensive Income Anson Industries, Inc....Ch. 14 - Horizontal analysis of income statement For 20V2,...Ch. 14 - Prob. 14.2APRCh. 14 - Prob. 14.3APRCh. 14 - Measures of liquidity, solvency, and profitability...Ch. 14 - Solvency and profitability trend analysis Addai...Ch. 14 - Horizontal analysis of income statement For 20Y2,...Ch. 14 - Prob. 14.2BPRCh. 14 - Effect of transactions on current position...Ch. 14 - Measures of liquidity, solvency and profitability...Ch. 14 - Solvency and profitability trend analysis Crosby...Ch. 14 - Analyze and compare Amazon.com, Best Buy, and...Ch. 14 - Prob. 14.2MADCh. 14 - Analyze Deere Company Deere Company (DE)...Ch. 14 - Analyze and compare Marriott and Hyatt Marriott...Ch. 14 - Prob. 14.1TIFCh. 14 - Prob. 14.3TIF
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