Working Papers, Chapters 18-26 for Warren/Reeve/Duchacâs Accounting, 27E
27th Edition
ISBN: 9781337272162
Author: Reeve, James M., Duchac, Jonathan, WARREN, Carl S.
Publisher: South-Western College Pub
expand_more
expand_more
format_list_bulleted
Question
Chapter 3, Problem 3.28EX
(a)
To determine
Vertical analysis:
Vertical analysis is the method of financial statement analysis, and it is useful to evaluating a company’s performance and financial condition. Vertical analysis is helpful for analyzing the changes in the financial statements over the time, and comparing the each item on a financial statement with a total amount from the same statement. In the vertical analysis, the financial statements are analyzed in the following manner:
- In vertical analysis of a
balance sheet , each asset item is stated as a percent of the total asset, and each liability and owner’s equity item is stated as a percent of total liabilities and owner’s equity. - In vertical analysis of an income statement, each item of revenue and expense is stated as a percent of total revenues of the business.
To prepare: The vertical analysis of A Incorporation’s operating income statement.
(b)
To determine
To explain: The decrease in income from operations.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
Vertical analysis
Amazon.com, Inc.is the largest Internet retailer in the United States. Amazon's income statements through income from operations for two recent years are as follows (in mH!ions):
Amazon.com,Inc.
Operating Income Statements
For the Years Ended December 31 (in millions)
Year 2
Year 1
Product sales
$70,080
$60,903
Service sales
18,908
13,549
Total sales
$88,988
$74,452
Cost of sales
$62,752
$54,181
Fulfillment
10,766
8,585
Marketing
4,332
3,133
Technology and content
9,275
6,565
General and administrative
1,552
1,129
Other operating expense (income), net
133
114
Total operating expenses
$88,810
$73,707
Income from operations
$ 178
$ 745
1.Prepare a vertical analysis of the two operating income statements.Round percentages to one decimal pl
2.Use the vertical analysis to explain the decrease in income from operations.
Analyze and compare Amazon.com, Best Buy, and Walmart
The condensed income statements through operating income for Amazon.com, Inc. (AMZN), Best Buy Co., Inc. (BBY), and Walmart Inc. (WMT) for a recent fiscal year follow (in millions):
Line Item Description
Amazon
Best Buy
Walmart
Sales
$280,522
$43,638
$523,964
Cost of sales
(165,536)
(33,590)
(394,605)
Gross profit
$114,986
$10,048
$129,359
Selling, general, and administrative expenses
(100,244)
(7,998)
(108,791)
Operating expenses
(201)
(41)
0
Operating income
$14,541
$2,009
$20,568
Question Content Area
1. Prepare comparative common-sized income statements for each company. Round percentages to one decimal place. If percentages is zero, enter "0". For those boxes in which you must enter subtractive or negative numbers use a minus sign. (Example: -300)
Comparative Income statements
Line Item Description
Amazon
Best Buy
Walmart
Sales
Sales%
Sales%
Sales%
Cost of sales
Cost of sales%
Cost of…
Horizontal analysis of income statement
For 20Y2, Macklin Inc. reported a significant increase in net income. At the end of the year, John Mayer, the president, is presented with the following condensed comparitive income statement:
McDade Company
Comparative Income Statement
For the Years Ended December 31, 20Y2 and 20Y1
20Y2
20Y1
Sales
$910, 000
$700,000
Cost of goods sold
441,000
350,000
Gross Profit
$469,000
350,000
Selling expenses
$139,150
$115,000
Administrative expenses
99,450
85,000
Total operating expenses
$238,600
$200,000
Income from operations
$230,400
$150,000
Other income
65,000
50,000
Income before income tax
$295,400
$200,000
Income tax expense
65,000
50,000
Net income
$230,400
$150,000
Instructions
1. Prepare a comparitive income statement with horizontal analysis for the two-year period , using 20Y1 as the base year.
(Round percentages to one decimal place.)
2. To the extent the data permit, comment on the significant…
Chapter 3 Solutions
Working Papers, Chapters 18-26 for Warren/Reeve/Duchacâs Accounting, 27E
Ch. 3 - How are revenues and expenses reported on the...Ch. 3 - Is the matching concept related to (a) the cash...Ch. 3 - Why are adjusting entries needed at the end of an...Ch. 3 - What is the difference between adjusting entries...Ch. 3 - Identify the four different categories of...Ch. 3 - If the effect of the debit portion of an adjusting...Ch. 3 - If the effect of the credit portion of an...Ch. 3 - Does every adjusting entry affect net income for...Ch. 3 - Prob. 9DQCh. 3 - (a) Explain the purpose of the two accounts:...
Ch. 3 - Accounts requiring adjustment Indicate with a Yes...Ch. 3 - Accounts requiring adjustment Indicate with a Yes...Ch. 3 - Prob. 3.2APECh. 3 - Type of adjustment Classify the following items as...Ch. 3 - Adjustment for accrued revenues At the end of the...Ch. 3 - Adjustment for accrued expense Prospect Realty Co....Ch. 3 - Adjustment for accrued expense We-Sell Realty Co....Ch. 3 - Adjustment for unearned revenue On June 1, 2019,...Ch. 3 - Adjustment for unearned revenue The balance in the...Ch. 3 - Adjustment for prepaid expense The prepaid...Ch. 3 - Adjustment for prepaid expense The supplies...Ch. 3 - Adjustment for depreciation The estimated amount...Ch. 3 - Adjustment for depreciation The estimated amount...Ch. 3 - Effect of omitting adjustments For the year ending...Ch. 3 - Effect of omitting adjustments For the year ending...Ch. 3 - Effect of errors on adjusted trial balance For...Ch. 3 - Effect of errors on adjusted trial balance For...Ch. 3 - Vertical analysis Two income statements for...Ch. 3 - Vertical analysis Two income statements for Cornea...Ch. 3 - Classifying types of adjustments Classify the...Ch. 3 - Classifying adjusting entries The following...Ch. 3 - Adjusting entry for accrued fees At the end of the...Ch. 3 - Effect of omitting adjusting entry The adjusting...Ch. 3 - Adjusting entries for accrued salaries Garcia...Ch. 3 - Determining wages paid The wages payable and wages...Ch. 3 - Effect of omitting adjusting entry Accrued...Ch. 3 - Effect of omitting adjusting entry When preparing...Ch. 3 - Adjusting entries for unearned fees The balance in...Ch. 3 - Effect of omitting adjusting entry At the end of...Ch. 3 - Adjusting entry for supplies The balance in the...Ch. 3 - Determining supplies purchased The supplies and...Ch. 3 - Effect of omitting adjusting entry At August 31,...Ch. 3 - Adjusting entries for prepaid insurance The...Ch. 3 - Adjusting entries for prepaid insurance The...Ch. 3 - Adjusting entries for unearned and accrued fees...Ch. 3 - Adjusting entries for prepaid and accrued taxes...Ch. 3 - Adjustment for depreciation The estimated amount...Ch. 3 - Determining fixed asset's book value The balance...Ch. 3 - Book value of fixed assets In a recent balance...Ch. 3 - Effects of errors on financial statements For a...Ch. 3 - Effects of errors on financial statements For a...Ch. 3 - Effects of errors on financial statements The...Ch. 3 - Effects of errors on financial statements If the...Ch. 3 - Adjusting entries for depreciation; effect of...Ch. 3 - Adjusting entries from trial balances The...Ch. 3 - Adjusting entries from trial balances The...Ch. 3 - Prob. 3.28EXCh. 3 - Prob. 3.29EXCh. 3 - Prob. 3.30EXCh. 3 - Adjusting entries On December 31, the following...Ch. 3 - Prob. 3.2APRCh. 3 - Adjusting entries Milbank Repairs Service, an...Ch. 3 - Adjusting entries Good Note Company specializes in...Ch. 3 - Adjusting entries and adjusted trial balances...Ch. 3 - Adjusting entries and errors At the end of April,...Ch. 3 - Adjusting entries On May 31, the following data...Ch. 3 - Prob. 3.2BPRCh. 3 - Adjusting entries Crazy Mountain Outfitters Co.,...Ch. 3 - Adjusting entries The Signage Company specializes...Ch. 3 - Adjusting entries and adjusted trial balances...Ch. 3 - Prob. 3.6BPRCh. 3 - The unadjusted trial balance that you prepared for...Ch. 3 - Prob. 3.1CPCh. 3 - Ethics in Action Daryl Kirby opened Squid Realty...Ch. 3 - Prob. 3.4CPCh. 3 - Prob. 3.5CP
Knowledge Booster
Similar questions
- unoarrow_forwardAssume the following sales data for a company: Line Item Description Amount Current year $891,303 Preceding year 515,759 What is the percentage increase in sales from the preceding year to the current year?arrow_forwardAssume the following sales data for a company: Line Item Description Amount Current year $883,993 Preceding year 542,076 What is the percentage increase in sales from the preceding year to the current year? a. 63.08% b. 61.32% c. 163.08% d. 38.68%arrow_forward
- Vertical Analysis of Income Statement Revenue and expense data for Innovation Quarter Inc. for two recent years are as follows: Current Year Previous Year Sales $457,000 $407,000 Cost of goods sold 283,340 231,990 Selling expenses 68,550 69,190 Administrative expenses 77,690 65,120 Income tax expense 9,140 16,280 a. Prepare an income statement in comparative form, stating each item for both years as a percent of sales. If required, round percentages to one decimal place. Enter all amounts as positive numbers. Innovation Quarter Inc. Comparative Income Statement For the Years Ended December 31 Current year Amount Current year Percent Previous year Amount Previous year Percent Sales $457,000 % $407,000 % Cost of goods sold 283,340 231,990 % % % Selling expenses 68,550 % 69,190 Administrative expenses 77,690 % 65,120 % % % % % Income tax expense 9,140 % 16,280 % % % b. The vertical analysis indicates that the cost of goods sold as a percent of sales by 5 percentage points, while selling…arrow_forwardVertical analysisarrow_forwardAssume the following sales data for a company: Current year $896,005 Preceding year 607,844 What is the percentage increase in sales from the preceding year to the current year (rounded to one decimal place)? Oa. 47.4% Ob. 15.3% Oc. 32.2% Od. 79.6%arrow_forward
- VERTICAL ANALYSIS Give the analysis per line item. Sabina Electronics Comparative Income Statement This year Last year This year 5,000,000 3,875,000 1,125,000 653,000 472,000 72,000 400,000 120,000 280,000 110,000 Last year 4,350,000 3,450,000 900,000 548,000 352,000 72,000 280,000 84,000 196,000 95,000 Sales 100% 100% Cost of goods sold Gross margin Selling and administrative expenses Net operating income Interest expense Net income before taxes 78% 79% 23% 21% 13% 13% 9% 8% 1% 2% 6% 2% 5% 2% 8% Income taxes (30%) Net income 2% 6% Common dividends 2% 101,000 579,000 680,000 Net income retained 170,000 3% 2% Beginning retained earnings Ending retained earnings 680,000 850,000arrow_forwardSegment analysis McHale company does business in two customer segments, Retail and wholesale. The following annual revenue information was determined from the accounting system's invoice information: prepare horizontal and vertical analyses of the segment. Round to one decimal place.arrow_forwardHorizontal Analysis of Income StatementFor 20Y2, Macklin Inc. reported a significant increase in net income. At the end of the year, John Mayer, the president, is presented with the following condensedcomparative income statement:Macklin Inc.Comparative Income StatementFor the Years Ended December 31, 20Y2 and 20Y120Y2 20Y1Sales $910,000 $700,000Cost of goods sold 441,000 350,000Gross profit $469,000 $350,000Selling expenses $139,150 $115,000Administrative expenses 99,450 85,000Total operating expenses $238,600 $200,000Income from operations $230,400 $150,000Other income 65,000 50,000Income before income tax $295,400 $200,000Income tax expense 65,000 50,000Net income $230,400 $150,000Required:1. Prepare a comparative income statement with horizontal analysis for the two-year period, using 20Y1 as the base year. Round to one decimal place. Use theminus sign to indicate a decrease in the "Difference" columns.Macklin Inc.Comparative Income StatementFor the Years Ended December 31, 20Y2…arrow_forward
- Vertical analysis income statement Revenue expense data for Innovation quarter Inc for two recent years as follows. Sales Cost of goods. Selling expenses Administrative expenses Income tax expense Current year. 4,000,000 2,280,000 600,000 520,000 240,000 Previous year 3,600,000 1,872,000 648,000 360,000 216,000 A. Prepare an income statement in comparative form, stating to each item for both of years as a percent of sales. Round to the nearest whole percentage. Innovation quarter Inc comparative income tax for the years ended December 31st Sales Cost of goods Selling expenses Administrative expenses Income tax expense $ % $ % $ % $ % $ % $ % $ % $ % B. The vertical analysis indicates that the cost of the goods sold as a percent of sales by 5 percentage points, while selling expenses by 3% percentage and administrative expenses by 3% percentage points. Thus net income as…arrow_forwardSegment Analysis Verity Company does business in two customer segments: Retail and Wholesale. The following annual revenue information was determined from the accounting system's invoice information: 20Y5 20Y4 Retail $145,400 $138,500 Wholesale 173,100 189,300 Total revenue $318,500 $327,800 Prepare a horizontal analysis of the segments. Round percentages to one decimal place. Enter negative values as negative numbers. Verity Company Horizontal Analysis For the Years 20Y4 and 20Y5 20Y5 20Y4 Difference - Amount Difference - Percent Retail $145,400 $138,500 $fill in the blank fill in the blank % Wholesale 173,100 189,300 fill in the blank fill in the blank % Total revenue $318,500 $327,800 $fill in the blank fill in the blank % Prepare a vertical analysis of the segments. If required, round percentages to one decimal place. Verity Company Vertical Analysis For the Years 20Y4 and 20Y5 20Y5 Amount 20Y5 Percent 20Y4…arrow_forwardVertical analysis Two income statements for Cornea Company follow: Cornea Company Income Statements For the Years Ended December 31 20Y9 20Y8 Fees earned $1,570,000 $1,300,000 Expenses (832,100) (780,000) Net income $737,900 $520,000 Required: a. Prepare a vertical analysis of Cornea Company’s income statements. If required, round your percentage to the nearest whole number. Cornea Company Income Statements For the Years Ended December 31 20Y9 20Y8 Amount Percent Amount Percent Fees earned $1,570,000 % $1,300,000 % Expenses (832,100) % (780,000) % Operating income $737,900 % $520,000 % b. Does the vertical analysis indicate a favorable or an unfavorable trend?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Corporate Financial AccountingAccountingISBN:9781305653535Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
Financial AccountingAccountingISBN:9781337272124Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
Financial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,
Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
Financial & Managerial AccountingAccountingISBN:9781337119207Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
Corporate Financial Accounting
Accounting
ISBN:9781305653535
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Cengage Learning
Financial Accounting
Accounting
ISBN:9781337272124
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Cengage Learning
Financial And Managerial Accounting
Accounting
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:Cengage Learning,
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Financial & Managerial Accounting
Accounting
ISBN:9781337119207
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Cengage Learning