
Prepare a corrected comparative income statement for the years 2020 and 2019 of Company T.

Explanation of Solution
Horizontal analysis of financial statements: In horizontal analysis of financial statement, the amount of each item of the current period’s financial statement is compared with the previous period’s financial statement. The amount of each item increased or decreased in the current financial statement, and its respective percentage can be computed by taking the previous period statement as the base. This analysis is also known as trend analysis. The horizontal analysis percentage is calculated by using the given formula:
Prepare a corrected comparative income statement for the years 2020 and 2019 of Company T.
Company T | ||
Comparative Income Statement | ||
For the Year Ended December 31 | ||
Particulars | 2020 | 2019 |
Amount ($) | Amount ($) | |
Sales | (1) $2,900,000 | (2) $3,900,000 |
Cost of goods sold | (3) ($980,000) | (4) ($2,310,000) |
Gross profit | $1,920,000 | $1,590,000 |
Operating expenses | (5) ($1,020,000) | (6) ($1,390,000) |
Operating income | $900,000 | $200,000 |
Other item: | ||
Loss from obsolescence inventory | ($150,000) | $0 |
Unusual loss | $0 | ($60,000) |
Unusual gain | $250,000 | |
Miscellaneous | (7) ($50,000) | (8) ($90,000) |
Pretax income from continuing operation | $700,000 | $300,000 |
Less: Income tax expense | ($210,000) | ($90,000) |
Result from discontinuing operations: | ||
Income (loss) from operations of discontinued division | (9) ($210,000) | (10) $210,000 |
Loss on write-down of held-for-sale backscratcher | (11) ($112,000) | $0 |
Net income | $168,000 | $420,000 |
Table (1)
Working note (1):
Calculate the amount of sales for 2020:
Working note (2):
Calculate the amount of sales for 2019:
Working note (3):
Calculate the amount of cost of goods sold for 2020:
Working note (4):
Calculate the amount of cost of goods sold for 2019:
Working note (5):
Calculate the amount of operating expenses for 2020:
Working note (6):
Calculate the amount of operating expenses for 2019:
Working note (7):
Calculate the amount of miscellaneous expenses for 2020:
Working note (8):
Calculate the amount of miscellaneous expenses for 2019:
Working note (9):
Calculate income/loss from operations of discontinued division for 2020:
Working note (10):
Calculate income/loss from operations of discontinued division for 2019:
Working note (11):
Calculate loss on write-down of held-for-sale backscratcher:
Want to see more full solutions like this?
Chapter 5 Solutions
Intermediate Accounting: Reporting and Analysis - With Access
- Answer this below Questionarrow_forwardNeed help with this question solution general accountingarrow_forwardHorizon Ltd. signs a four-year lease agreement with Orion Inc. The agreement requires annual beginning-of-the-year payments of $12,000. The fair value of the lease is $44,000. Over the lease period, how much interest will Horizon Ltd. pay?arrow_forward
- A manufacturing firm currently operates with 120 production plants. The depreciation rate for these plants is 8%, and the real rate of interest offered by banks is 6%. How much should the firm invest to augment its capital stock? (Round your calculation to nearest number) a. 09 b. 17 c. 21. D. 25arrow_forwardCompute the meterialsarrow_forwardSkyline Enterprises' CVP income statement includes sales of 5,500 units, a selling price of $120 per unit, variable expenses of $75 per unit, and fixed expenses of $140,000. What is the net income? a. $82,500 b. $125,000 c. $107,500 d. $75,000arrow_forward
- do not use ai solution provide answer General accountingarrow_forwardDon't use ai given answer accounting questionsarrow_forwardDuring 20x2 Creswell Corporation sold $5,500 of inventory on credit. The company's beginning and ending accounts receivable balances were $30,000 and $32,500, respectively. How much cash did Creswell Corporation collect on the account? If the ending accounts receivable had been $27,000, how much cash would Creswell Corporation have collected?arrow_forward
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage LearningCornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningPrinciples of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College

