Accounting
27th Edition
ISBN: 9781285149165
Author: WARREN
Publisher: CENGAGE C
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Question
Chapter 17, Problem 17.1APR
1.
To determine
Horizontal Analysis
Horizontal analysis refers to the measurement of percentage change in the comparative financial statements. It compares the items from the financial statements from one to the other years, and indicates the trends.
To Prepare: The horizontal analysis of the comparative income statement of Company M for the year 20Y2.
Given info: Income statement for 20Y2 and 20Y1.
To determine
2.
To comment: Significant relationships revealed by the horizontal analysis.
Expert Solution & Answer
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For 20Y2, McDade Company reported a decline in net income. At the end of the year, T. Burrows, the president, is presented with the following condensed comparative income Statement:
McDade CompanyComparative Income StatementFor the Years Ended December 31, 20Y2 and 20Y1
20Y2
20Y1
Sales..........................
$16,800,000
$15,000,000
Cost of goods sold..............
11,500,000
10,000,000
Gross profit....................
$ 5,300,000
$ 5,000,000
Selling expenses...............
$ 1,770,000
$ 1,500,000
Administrative expenses........
1,220,000
$ 1,000,000
Total operating expenses.......
$ 2,990,000
$ 2,500,000
Income from operations........
$ 2,310,000
$ 2,500,000
Other revenue.................
256,950
225,000
Income before income tax......
$ 2,566,950
$ 2,725,000
Income tax expense............
1,413,000
1,500,000
Net income....................
$ 1,153,950
$ 1,225,0000
Instructions1. Prepare a comparative income statement with horizontal analysis for the…
Horizontal Analysis of Income Statement
For 20Y2, Macklin Inc. reported a significant decrease in net income. At the end of the year, John Mayer, the
president, is presented with the following condensed comparative income statement:
Macklin Inc.
Comparative Income Statement
For the Years Ended December 31, 20Y2 and 20Y1
20Y2
20Y1
Sales
$794,884 $722,000
i ne si st
Cost of goods sold
(561,200) (460,000)
Gross profit
$233,684 $262,000
Selling expenses
$(77,780) $(61,000)
Administrative expenses
(45,520)
(38,000)
$(123,300) $(99,000)
Total operating expenses
Operating income
$110,384 $163,000
Other revenue
3,846
Income before income tax expense $114,230 $166,000
Income tax expense
(32,000)
(49,800)
$82,230 $116,200
Net income
Required:
1. Prepare a comparative income statement with horizontal analysis for the two-year period, using 20Y1 as the base
year. Use the minus sign to indicate a decrease in the "Increase/(Decrease)" columns. If required, round percentages
to one decimal place.…
Compute common-size percents for the following comparative income statements (round percents to one decimal). Using the common-size percents, which item is most responsible for the decline in net income?
Chapter 17 Solutions
Accounting
Ch. 17 - Prob. 1DQCh. 17 - Prob. 2DQCh. 17 - A companys current year net income (after income...Ch. 17 - How would the current and quick ratios of a...Ch. 17 - Prob. 5DQCh. 17 - What do the following data, taken from a...Ch. 17 - a. How does the return on total assets differ from...Ch. 17 - Kroger, a grocery store, recently had a price-...Ch. 17 - Prob. 9DQCh. 17 - Prob. 10DQ
Ch. 17 - Horizontal analysis The comparative temporary...Ch. 17 - Prob. 17.1BPECh. 17 - Vertical analysis Income statement information for...Ch. 17 - Vertical analysis Income statement information for...Ch. 17 - Prob. 17.3APECh. 17 - Prob. 17.3BPECh. 17 - Accounts receivable analysis A company reports the...Ch. 17 - Accounts receivable analysis A company reports the...Ch. 17 - Inventory analysis A company reports the...Ch. 17 - Inventory analysis A company reports the...Ch. 17 - Prob. 17.6APECh. 17 - Long-term solvency analysis The following...Ch. 17 - Times interest earned A company reports the...Ch. 17 - Times interest earned A company reports the...Ch. 17 - Asset turnover A company reports the following:...Ch. 17 - Asset turnover A company reports the following:...Ch. 17 - Return on total assets A company reports the...Ch. 17 - Return on total assets A company reports the...Ch. 17 - Common stockholders profitability analysis A...Ch. 17 - Common stockholders profitability analysis A...Ch. 17 - Prob. 17.11APECh. 17 - Prob. 17.11BPECh. 17 - Prob. 17.1EXCh. 17 - Prob. 17.2EXCh. 17 - Common-sized income statement Revenue and expense...Ch. 17 - Vertical analysis of balance sheet Balance sheet...Ch. 17 - Horizontal analysis of the income statement Income...Ch. 17 - Current position analysis The following data were...Ch. 17 - Prob. 17.7EXCh. 17 - Current position analysis The bond indenture for...Ch. 17 - Accounts receivable analysis The following data...Ch. 17 - Accounts receivable analysis Xavier Scores Company...Ch. 17 - Inventory analysis The following data were...Ch. 17 - Inventory analysis QT, Inc. and Elppa Computers,...Ch. 17 - Ratio of liabilities to stockholders equity and...Ch. 17 - Ratio of liabilities to stockholders equity and...Ch. 17 - Ratio of liabilities to stockholders equity and...Ch. 17 - Prob. 17.16EXCh. 17 - Profitability ratios The following selected data...Ch. 17 - Profitability ratios Ralph Lauren Corporation...Ch. 17 - Six measures of solvency or profitability The...Ch. 17 - Five measures of solvency or profitability The...Ch. 17 - Prob. 17.21EXCh. 17 - Prob. 17.22EXCh. 17 - Earnings per share, discontinued operations The...Ch. 17 - Prob. 17.24EXCh. 17 - Prob. 17.25EXCh. 17 - Prob. 17.1APRCh. 17 - Prob. 17.2APRCh. 17 - Prob. 17.3APRCh. 17 - Measures of liquidity, solvency, and profitability...Ch. 17 - Solvency and profitability trend analysis Addai...Ch. 17 - Prob. 17.1BPRCh. 17 - Prob. 17.2BPRCh. 17 - Effect of transactions on current position...Ch. 17 - Measures of liquidity, solvency and profitability...Ch. 17 - Solvency and profitability trend analysis Crosby...Ch. 17 - Financial statement analysis The financial...Ch. 17 - Prob. 17.1CPCh. 17 - Prob. 17.3CPCh. 17 - Common-sized income statements The condensed...Ch. 17 - Profitability analysis Deere Company manufactures...Ch. 17 - Comprehensive profitability and solvency analysis...
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