FUNDAMENTAL ACCT PRIN TEXT+CONNECT CODE
15th Edition
ISBN: 9781265564483
Author: Wild
Publisher: MCG
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Question
Chapter 17, Problem 1APSA
Requirement-1:
To determine
To calculate: The trend analysis for income statements and
Requirement-1:
Expert Solution
![Check Mark](/static/check-mark.png)
Answer to Problem 1APSA
Solution: The trend analysis for income statements and balance sheet is as follows:
HAROUN COMPANY | |||||||
Comparative Income Statements Trend analysis | |||||||
2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009 | |
Sales | 182.5% | 161.2% | 147.6% | 136.2% | 127.8% | 119.6% | 100.0% |
Cost of Goods Sold | 212.6% | 176.1% | 153.9% | 136.9% | 128.3% | 121.2% | 100.0% |
Gross Profit | 131.0% | 135.7% | 136.8% | 135.1% | 126.9% | 117.0% | 100.0% |
Operating Expenses | 279.7% | 216.9% | 198.3% | 144.1% | 123.7% | 122.0% | 100.0% |
Net Income | 52.7% | 92.9% | 104.5% | 130.4% | 128.6% | 114.3% | 100.0% |
HAROUN COMPANY | |||||||
Comparative Balance Sheets Trend analysis | |||||||
2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009 | |
Assets: | |||||||
Cash (A) | 65.2% | 87.6% | 92.1% | 94.4% | 98.9% | 96.6% | 100.0% |
226.9% | 238.0% | 215.7% | 166.7% | 147.2% | 139.8% | 100.0% | |
Merchandise Inventory (C) | 298.9% | 221.8% | 195.8% | 167.8% | 152.2% | 131.7% | 100.0% |
Other Current Assets (D) | 400.0% | 355.6% | 155.6% | 377.8% | 311.1% | 311.1% | 100.0% |
Long Term Investments (E) | 0.0% | 0.0% | 0.0% | 100.0% | 100.0% | 100.0% | 100.0% |
Plant assets, net (F) | 278.6% | 277.8% | 241.7% | 130.2% | 134.9% | 118.6% | 100.0% |
Total Assets (G) | 246.8% | 222.3% | 195.4% | 144.4% | 138.6% | 124.0% | 100.0% |
Liabilities and Equity: | |||||||
Current Liabilities (H) | 432.6% | 369.5% | 254.6% | 217.7% | 193.6% | 185.1% | 100.0% |
Long term Liabilities (I) | 323.5% | 285.0% | 278.0% | 142.5% | 145.0% | 155.0% | 100.0% |
Common Stock (J) | 153.8% | 153.8% | 153.8% | 130.8% | 130.8% | 100.0% | 100.0% |
Other paid in capital (K) | 166.7% | 166.7% | 166.7% | 113.3% | 113.3% | 100.0% | 100.0% |
213.2% | 179.2% | 137.7% | 124.5% | 109.4% | 91.2% | 100.0% | |
Total Liabilities and Equity (M) | 246.8% | 222.3% | 195.4% | 144.4% | 138.6% | 124.0% | 100.0% |
Explanation of Solution
The trend analysis for income statements and balance sheet is explained as follows:
HAROUN COMPANY | |||||||
Comparative Income Statements Trend analysis | |||||||
($ thousands) | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009 |
Sales (A) | 1694 | 1496 | 1370 | 1264 | 1186 | 1110 | 928 |
Trend % = A / 928 | 182.5% | 161.2% | 147.6% | 136.2% | 127.8% | 119.6% | 100.0% |
Cost of Goods Sold (B) | 1246 | 1032 | 902 | 802 | 752 | 710 | 586 |
Trend % = B / 586 | 212.6% | 176.1% | 153.9% | 136.9% | 128.3% | 121.2% | 100.0% |
Gross Profit (C) | 448 | 464 | 468 | 462 | 434 | 400 | 342 |
Trend % = C / 342 | 131.0% | 135.7% | 136.8% | 135.1% | 126.9% | 117.0% | 100.0% |
Operating Expenses (D) | 330 | 256 | 234 | 170 | 146 | 144 | 118 |
Trend % = D / 118 | 279.7% | 216.9% | 198.3% | 144.1% | 123.7% | 122.0% | 100.0% |
Net Income (E) | 118 | 208 | 234 | 292 | 288 | 256 | 224 |
Trend % = E / 224 | 52.7% | 92.9% | 104.5% | 130.4% | 128.6% | 114.3% | 100.0% |
HAROUN COMPANY | |||||||
Comparative Balance Sheets Trend analysis | |||||||
($ thousands) | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009 |
Assets: | |||||||
Cash (A) | 58 | 78 | 82 | 84 | 88 | 86 | 89 |
Trend % = A / 89 | 65.2% | 87.6% | 92.1% | 94.4% | 98.9% | 96.6% | 100.0% |
Accounts receivables, net (B) | 490 | 514 | 466 | 360 | 318 | 302 | 216 |
Trend % = B / 216 | 226.9% | 238.0% | 215.7% | 166.7% | 147.2% | 139.8% | 100.0% |
Merchandise Inventory (C) | 1838 | 1364 | 1204 | 1032 | 936 | 810 | 615 |
Trend % = C / 615 | 298.9% | 221.8% | 195.8% | 167.8% | 152.2% | 131.7% | 100.0% |
Other Current Assets (D) | 36 | 32 | 14 | 34 | 28 | 28 | 9 |
Trend % = D / 9 | 400.0% | 355.6% | 155.6% | 377.8% | 311.1% | 311.1% | 100.0% |
Long Term Investments (E) | 0 | 0 | 0 | 146 | 146 | 146 | 146 |
Trend % = E / 146 | 0.0% | 0.0% | 0.0% | 100.0% | 100.0% | 100.0% | 100.0% |
Plant assets, net (F) | 2020 | 2014 | 1752 | 944 | 978 | 860 | 725 |
Trend % = F / 725 | 278.6% | 277.8% | 241.7% | 130.2% | 134.9% | 118.6% | 100.0% |
Total Assets (G) | 4442 | 4002 | 3518 | 2600 | 2494 | 2232 | 1800 |
Trend % = G / 1805 | 246.8% | 222.3% | 195.4% | 144.4% | 138.6% | 124.0% | 100.0% |
Liabilities and Equity: | |||||||
Current Liabilities (H) | 1220 | 1042 | 718 | 614 | 546 | 522 | 282 |
Trend % = H / 282 | 432.6% | 369.5% | 254.6% | 217.7% | 193.6% | 185.1% | 100.0% |
Long term Liabilities (I) | 1294 | 1140 | 1112 | 570 | 580 | 620 | 400 |
Trend % = I / 400 | 323.5% | 285.0% | 278.0% | 142.5% | 145.0% | 155.0% | 100.0% |
Common Stock (J) | 1000 | 1000 | 1000 | 850 | 850 | 650 | 650 |
Trend % = J / 650 | 153.8% | 153.8% | 153.8% | 130.8% | 130.8% | 100.0% | 100.0% |
Other paid in capital (K) | 250 | 250 | 250 | 170 | 170 | 150 | 150 |
Trend % = K / 150 | 166.7% | 166.7% | 166.7% | 113.3% | 113.3% | 100.0% | 100.0% |
Retained Earnings (L) | 678 | 570 | 438 | 396 | 348 | 290 | 318 |
Trend % = L / 318 | 213.2% | 179.2% | 137.7% | 124.5% | 109.4% | 91.2% | 100.0% |
Total Liabilities and Equity (M) | 4442 | 4002 | 3518 | 2600 | 2494 | 2232 | 1800 |
Trend % = M / 1804 | 246.8% | 222.3% | 195.4% | 144.4% | 138.6% | 124.0% | 100.0% |
Conclusion
Hence, Horizontal Analysis is used to analyses the trend of a particular item of a statement.
Requirement-2:
To determine
To analyze: The trends of the financial statements
Requirement-2:
Expert Solution
![Check Mark](/static/check-mark.png)
Answer to Problem 1APSA
Solution: The Analysis of trends of the financial statements is as follows:
- Income Statement shows the increasing trend for sales revenues during the years and mix trend for the net income.
- Balance sheet shows the Increasing trend for total assets.
Explanation of Solution
The Analysis of trends of the financial statements is explained as follows:
- Income Statement shows the increasing trend for sales revenues during the years and mix trend for the net income. The net income shows the increasing trend from year 2009 to 2012 but a decreasing trend from year 2012 to 2015.
- Balance sheet shows the Increasing trend for total assets from the year 2009 to 2015.
Conclusion
Hence, Horizontal Analysis is used to analyses the trend of a particular item of a statement.
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