FUNDAMENTAL ACCOUNTING PRINCIPLES
24th Edition
ISBN: 9781260811704
Author: Wild
Publisher: MCG
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Question
Chapter 17, Problem 1BPSB
To determine
Concept Introduction:
Financial Statement analysis is done using the components of financial statement. These components are
Requirement-1:
To Calculate:
Trend Percents for all components of both statements using 2013 as base year
Expert Solution
Answer to Problem 1BPSB
Trend Percents for all components of both statements using 2013 as base year are as follows:
| TRIPOLY COMPANY | |||||||
| Comparative Income Statement Trend % | |||||||
| For the Years Ended December 31 | |||||||
| $ thousands | 2019 | 2018 | 2017 | 2016 | 2015 | 2014 | 2013 |
| Sales Trend % | 65.1% | 70.9% | 73.3% | 79.1% | 86.0% | 89.5% | 100.0% |
| Cost of Goods Sold Trend % | 72.6% | 76.3% | 77.4% | 82.6% | 89.5% | 92.1% | 100.0% |
| Gross profit Trend % | 59.2% | 66.7% | 70.0% | 76.3% | 83.3% | 87.5% | 100.0% |
| Operating expenses Trend % | 56.0% | 69.3% | 74.7% | 84.0% | 93.3% | 96.0% | 100.0% |
| Net income Trend % | 60.6% | 65.5% | 67.9% | 72.7% | 78.8% | 83.6% | 100.0% |
| TRIPOLY COMPANY | |||||||
| Comparative Year End Balance Sheet Trend % | |||||||
| $ thousands | 2019 | 2018 | 2017 | 2016 | 2015 | 2014 | 2013 |
| Assets: | |||||||
| Cash Trend % | 64.7% | 67.6% | 76.5% | 79.4% | 88.2% | 91.2% | 100.0% |
| 81.3% | 85.0% | 87.5% | 90.0% | 93.8% | 96.3% | 100.0% | |
| Merchandise Inventory Trend % | 79.8% | 82.7% | 85.6% | 86.5% | 89.4% | 91.3% | 100.0% |
| Other Current assets Trend % | 85.0% | 85.0% | 90.0% | 90.0% | 95.0% | 100.0% | 100.0% |
| Long term Investments Trend % | 32.7% | 27.3% | 23.6% | 100.0% | 100.0% | 100.0% | 100.0% |
| Plant Assets, net Trend % | 112.3% | 113.2% | 114.5% | 90.7% | 92.5% | 94.3% | 100.0% |
| Total Assets Trend % | 88.5% | 89.6% | 91.5% | 90.2% | 92.7% | 94.6% | 100.0% |
| Liabilities and Equity: | |||||||
| Current Liabilities Trend % | 52.9% | 55.7% | 66.4% | 67.9% | 75.0% | 92.9% | 100.0% |
| Long term liabilities Trend % | 35.4% | 46.2% | 54.6% | 56.9% | 74.6% | 82.3% | 100.0% |
| Common Stock Trend % | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% |
| Other Paid in capital Trend % | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% |
| 166.7% | 157.8% | 145.9% | 137.0% | 122.2% | 103.7% | 100.0% | |
| Total Liabilities and equity Trend % | 88.5% | 89.6% | 91.5% | 90.2% | 92.7% | 94.6% | 100.0% |
Explanation of Solution
Trend Percents for all components of both statements using 2013 as base year are calculated as follows:
| TRIPOLY COMPANY | |||||||
| Comparative Income Statement Trend % | |||||||
| For the Years Ended December 31 | |||||||
| $ thousands | 2019 | 2018 | 2017 | 2016 | 2015 | 2014 | 2013 |
| Sales | 560 | 610 | 630 | 680 | 740 | 770 | 860 |
| Sales Trend % | 65.1% | 70.9% | 73.3% | 79.1% | 86.0% | 89.5% | 100.0% |
| Cost of Goods Sold | 276 | 290 | 294 | 314 | 340 | 350 | 380 |
| Cost of Goods Sold Trend % | 72.6% | 76.3% | 77.4% | 82.6% | 89.5% | 92.1% | 100.0% |
| Gross profit | 284 | 320 | 336 | 366 | 400 | 420 | 480 |
| Gross profit Trend % | 59.2% | 66.7% | 70.0% | 76.3% | 83.3% | 87.5% | 100.0% |
| Operating expenses | 84 | 104 | 112 | 126 | 140 | 144 | 150 |
| Operating expenses Trend % | 56.0% | 69.3% | 74.7% | 84.0% | 93.3% | 96.0% | 100.0% |
| Net income | 200 | 216 | 224 | 240 | 260 | 276 | 330 |
| Net income Trend % | 60.6% | 65.5% | 67.9% | 72.7% | 78.8% | 83.6% | 100.0% |
| TRIPOLY COMPANY | |||||||
| Comparative Year End Balance Sheet Trend % | |||||||
| $ thousands | 2019 | 2018 | 2017 | 2016 | 2015 | 2014 | 2013 |
| Assets: | |||||||
| Cash | 44 | 46 | 52 | 54 | 60 | 62 | 68 |
| Cash Trend % | 64.7% | 67.6% | 76.5% | 79.4% | 88.2% | 91.2% | 100.0% |
| Accounts Receivable, net | 130 | 136 | 140 | 144 | 150 | 154 | 160 |
| Accounts Receivable, net Trend % | 81.3% | 85.0% | 87.5% | 90.0% | 93.8% | 96.3% | 100.0% |
| Merchandise Inventory | 166 | 172 | 178 | 180 | 186 | 190 | 208 |
| Merchandise Inventory Trend % | 79.8% | 82.7% | 85.6% | 86.5% | 89.4% | 91.3% | 100.0% |
| Other Current assets | 34 | 34 | 36 | 36 | 38 | 40 | 40 |
| Other Current assets Trend % | 85.0% | 85.0% | 90.0% | 90.0% | 95.0% | 100.0% | 100.0% |
| Long term Investments | 36 | 30 | 26 | 110 | 110 | 110 | 110 |
| Long term Investments Trend % | 32.7% | 27.3% | 23.6% | 100.0% | 100.0% | 100.0% | 100.0% |
| Plant Assets, net | 510 | 514 | 520 | 412 | 420 | 428 | 454 |
| Plant Assets, net Trend % | 112.3% | 113.2% | 114.5% | 90.7% | 92.5% | 94.3% | 100.0% |
| Total Assets | 920 | 932 | 952 | 938 | 964 | 984 | 1040 |
| Total Assets Trend % | 88.5% | 89.6% | 91.5% | 90.2% | 92.7% | 94.6% | 100.0% |
| Liabilities and Equity: | |||||||
| Current Liabilities | 148 | 156 | 186 | 190 | 210 | 260 | 280 |
| Current Liabilities Trend % | 52.9% | 55.7% | 66.4% | 67.9% | 75.0% | 92.9% | 100.0% |
| Long term liabilities | 92 | 120 | 142 | 148 | 194 | 214 | 260 |
| Long term liabilities Trend % | 35.4% | 46.2% | 54.6% | 56.9% | 74.6% | 82.3% | 100.0% |
| Common Stock | 160 | 160 | 160 | 160 | 160 | 160 | 160 |
| Common Stock Trend % | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% |
| Other Paid in capital | 70 | 70 | 70 | 70 | 70 | 70 | 70 |
| Other Paid in capital Trend % | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% |
| Retained earnings | 450 | 426 | 394 | 370 | 330 | 280 | 270 |
| Retained earnings Trend % | 166.7% | 157.8% | 145.9% | 137.0% | 122.2% | 103.7% | 100.0% |
| Total Liabilities and equity | 920 | 932 | 952 | 938 | 964 | 984 | 1040 |
| Total Liabilities and equity Trend % | 88.5% | 89.6% | 91.5% | 90.2% | 92.7% | 94.6% | 100.0% |
To determine
Concept Introduction:
Financial Statement analysis is done using the components of financial statement. These components are Balance sheet, Income statement, Statement of Cash flows etc. Annual report of a company contains financial statement of that year and previous year for comparison. If the company has subsidiaries or segments, the financial statement shall be consolidated for whole business of the company.
Requirement-2:
To Indicate:
The major financial statement trends over the period
Expert Solution
Answer to Problem 1BPSB
- Sales has decreased over this period
- Net income has decreased over this period
- Total Assets have Decreased over this period
Hence the overall trend is decreasing.
Explanation of Solution
The explanation for each trend is shows as below:
| $ thousands | 2019 | 2018 | 2017 | 2016 | 2015 | 2014 | 2013 |
| Sales Trend % | 65.1% | 70.9% | 73.3% | 79.1% | 86.0% | 89.5% | 100.0% |
| $ thousands | 2019 | 2018 | 2017 | 2016 | 2015 | 2014 | 2013 |
| Net income Trend % | 60.6% | 65.5% | 67.9% | 72.7% | 78.8% | 83.6% | 100.0% |
| $ thousands | 2019 | 2018 | 2017 | 2016 | 2015 | 2014 | 2013 |
| Total Assets Trend % | 88.5% | 89.6% | 91.5% | 90.2% | 92.7% | 94.6% | 100.0% |
Hence,
- Sales has decreased over this period
- Net income has decreased over this period
- Total Assets have Decreased over this period
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Chapter 17 Solutions
FUNDAMENTAL ACCOUNTING PRINCIPLES
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