Corporate Financial Accounting
14th Edition
ISBN: 9781305653535
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Textbook Question
Chapter 14, Problem 14.5EX
Horizontal analysis of the income statement
Income statement data for Winthrop Company for two recent years ended December 31 are as follows:
| Current Year | Previous Year | |
| Sales | $2,280,000 | $2,000,000 |
| Cost of goods sold | 1,960,000 | 1,750,000 |
| Gross profit | $ 320,000 | $ 250,000 |
| Selling expenses | $ 156,500 | $ 125,000 |
| Administrative expenses | 122,000 | 100,000 |
| Total operating expenses | $ 278,500 | $ 225,000 |
| Income before income tax | $ 41,500 | $ 25,000 |
| Income tax expense | 16,600 | 10,000 |
| Net income | $ 24,900 | $ 15,00 |
- A. Prepare a comparative income statement with horizontal analysis, indicating the increase
- B. (decrease) for the current year when compared with the previous year. (Round percentages to one decimal place.)
- C. What conclusions can be drawn from the horizontal analysis?
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Horizontal Analysis of the Income Statement
Income statement data for Winthrop Company for two recent years ended December 31, are as follows:
Current Year
Previous Year
Sales
$965,200
$760,000
Cost of goods sold
818,400
660,000
Gross profit
$146,800
$100,000
Selling expenses
$43,290
$37,000
Administrative expenses
38,750
31,000
Total operating expenses
$82,040
$68,000
Income before income tax
$64,760
$32,000
Income tax expenses
25,900
12,800
Net income
$38,860
$19,200
a. Prepare a comparative income statement with horizontal analysis, indicating the increase (decrease) for the current year when compared with the previous year. If required, round to one decimal place.
Winthrop Company
Comparative Income Statement
For the Years Ended December 31
Current Previous
Increase
Increase
year
year
(Decrease) (Decrease)
Amount Amount
Amount
Percent
Sales
$965,200 $760,000
%
Cost of goods sold
818,400
660,000
%
Gross profit
$146,800 $100,000
%
Selling expenses
$43,290
$37,000
%
Administrative…
Horizontal Analysis of the Income Statement
Income statement data for Winthrop Company for two recent years ended December 31, are as follows:
Current Year
Previous Year
Sales
$897,900
$730,000
774,400
Cost of goods sold
640,000
Gross profit
$123,500
$90,000
Selling expenses
$35,030
$31,000
Administrative expenses
31,460
26,000
Total operating expenses
$66,490
$57,000
$57,010
Income before income tax
$33,000
22,800
Income tax expenses
13,200
$34,210
$19,800
Net income
a. Prepare a comparative income statement with horizontal analysis, indicating the increase (decrease) for the current year when compared with the previous year. If required, round
to one decimal place.
Winthrop Company
Comparative Income Statement
For the Years Ended December 31
Current Previous
Increase
(Decrease) (Decrease)
Percent
Increase
year
Amount
year
Amount
Amount
Horizontal Analysis of the Income Statement
Income statement data for Winthrop Company for two recent years ended December 31, are as follows:
Current Year
Previous Year
Sales
$878,400
$720,000
Cost of goods sold
725,900
610,000
Gross profit
$152,500
$110,000
Selling expenses
$42,560
$38,000
Administrative expenses
38,400
32,000
Total operating expenses
$80,960
$70,000
Income before income tax
$71,540
$40,000
Income tax expenses
28,600
16,000
Net income
$42,940
$24,000
a. Prepare a comparative income statement with horizontal analysis, indicating the increase (decrease) for the current year when compared with the previous year. If required, round to one decimal place.
Winthrop Company
Comparative Income Statement
For the Years Ended December 31
CurrentyearAmount
PreviousyearAmount
Increase(Decrease)Amount
Increase(Decrease)Percent
Sales
$878,400
$720,000
$
%
Cost of goods…
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 - Prob. 9DQCh. 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 - Prob. 14.7BECh. 14 - Asset turnover A company reports the following:...Ch. 14 - Prob. 14.9BECh. 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 - Prob. 14.2EXCh. 14 - Common-sized income statement Revenue and expense...Ch. 14 - Vertical analysis of balance sheet Balance shed...Ch. 14 - Horizontal analysis of the income statement Income...Ch. 14 - Current position analysis The following data were...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 - Ratio of liabilities to stockholders' equity and...Ch. 14 - Prob. 14.16EXCh. 14 - Profitability ratios The following selected data...Ch. 14 - Profitability ratios Ralph Lauren Corporation...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 - Prob. 14.22EXCh. 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 - Financial Statement Analysis The financial...Ch. 14 - Prob. 14.1ADMCh. 14 - Deere: Profitability analysis Deere Company...Ch. 14 - Marriott and Hyatt: Solvency and profitability...Ch. 14 - Prob. 14.1TIFCh. 14 - Prob. 14.3TIF
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