Vertical Analysis: In vertical analysis, every line item is represented as a percentage of a base amount which can be either total assets, total liabilities, total equities, etc. Requirement 1 To compute: Cash as a percentage of total current assets, total current liabilities, total stockholders’ equity , and total assets for the current year and prior year.

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Answer 1

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Chapter 6, Problem 3.2AA

a.

To determine

Vertical Analysis:

In vertical analysis, every line item is represented as a percentage of a base amount which can be either total assets, total liabilities, total equities, etc.

Requirement 1

To compute:

Cash as a percentage of total current assets, total current liabilities, total stockholders’ equity, and total assets for the current year and prior year.

b.

To determine

Horizontal Analysis:

In horizontal analysis, a single line item is represented and compared as a percentage change from one base year to the subsequent years.

Requirement 2

To compute:

Percentage change between the beginning and ending cash balances for the current year.

c.

To determine

Days’ sales uncollected:

This ratio defines how fast a company converts its receivable into known amounts of cash. The lesser the ratio is, the better it is for the company as it will prove that the company employs an efficient system of cash collection from customers.

Requirement 3

To compute:

The days’ sales uncollected for both the current and prior year.

d.

To determine

Changes in Days’ sales uncollected:

The changes in the ratio of days’ sales uncollected will greatly impact the liquidity problem of the entity. If it is reduced, the company is considered to be efficiently managing its cash collection mechanism or in case, it is increased, the otherwise will follow.

Requirement 4

Whether S’s receivables collection is showing a favorable or unfavorable change.

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Consolidation after Several Years On January 1, 2016, Adams Corporation acquired all of the stock of Baker Company. The fair value of Adams’ shares used in the exchange was $37,500,000. At the time of acquisition, the book value of Baker’s shareholders’ equity was $5,000,000, and the book value of Baker’s building (25-year life) exceeded its fair value by $1,000,000. From the date of acquisition to December 31, 2021, Baker had cumulative net income of $1,300,000. For 2022, Baker reported net income of $300,000. Adams uses the complete equity method to account for its investment in Baker. There is no goodwill impairment loss for the period 2016 through 2021, but there is impairment loss of $100,000 in 2022. Baker declared no dividends during the period 2016–2022. Required Prepare the working paper eliminating entries necessary to consolidate the financial statements of Adams and Baker at December 31, 2022. Enter numerical answers using all zeros (do not abbreviate in thousands or in…

Answer 2

Question

Chapter 6, Problem 3.2AA

a.

To determine

Vertical Analysis:

In vertical analysis, every line item is represented as a percentage of a base amount which can be either total assets, total liabilities, total equities, etc.

Requirement 1

To compute:

Cash as a percentage of total current assets, total current liabilities, total stockholders’ equity, and total assets for the current year and prior year.

b.

To determine

Horizontal Analysis:

In horizontal analysis, a single line item is represented and compared as a percentage change from one base year to the subsequent years.

Requirement 2

To compute:

Percentage change between the beginning and ending cash balances for the current year.

c.

To determine

Days’ sales uncollected:

This ratio defines how fast a company converts its receivable into known amounts of cash. The lesser the ratio is, the better it is for the company as it will prove that the company employs an efficient system of cash collection from customers.

Requirement 3

To compute:

The days’ sales uncollected for both the current and prior year.

d.

To determine

Changes in Days’ sales uncollected:

The changes in the ratio of days’ sales uncollected will greatly impact the liquidity problem of the entity. If it is reduced, the company is considered to be efficiently managing its cash collection mechanism or in case, it is increased, the otherwise will follow.

Requirement 4

Whether S’s receivables collection is showing a favorable or unfavorable change.

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Answer 3

Question

Chapter 6, Problem 3.2AA

a.

To determine

Vertical Analysis:

In vertical analysis, every line item is represented as a percentage of a base amount which can be either total assets, total liabilities, total equities, etc.

Requirement 1

To compute:

Cash as a percentage of total current assets, total current liabilities, total stockholders’ equity, and total assets for the current year and prior year.

b.

To determine

Horizontal Analysis:

In horizontal analysis, a single line item is represented and compared as a percentage change from one base year to the subsequent years.

Requirement 2

To compute:

Percentage change between the beginning and ending cash balances for the current year.

c.

To determine

Days’ sales uncollected:

This ratio defines how fast a company converts its receivable into known amounts of cash. The lesser the ratio is, the better it is for the company as it will prove that the company employs an efficient system of cash collection from customers.

Requirement 3

To compute:

The days’ sales uncollected for both the current and prior year.

d.

To determine

Changes in Days’ sales uncollected:

The changes in the ratio of days’ sales uncollected will greatly impact the liquidity problem of the entity. If it is reduced, the company is considered to be efficiently managing its cash collection mechanism or in case, it is increased, the otherwise will follow.

Requirement 4

Whether S’s receivables collection is showing a favorable or unfavorable change.

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Answer 4

Question

Chapter 6, Problem 3.2AA

a.

To determine

Vertical Analysis:

In vertical analysis, every line item is represented as a percentage of a base amount which can be either total assets, total liabilities, total equities, etc.

Requirement 1

To compute:

Cash as a percentage of total current assets, total current liabilities, total stockholders’ equity, and total assets for the current year and prior year.

b.

To determine

Horizontal Analysis:

In horizontal analysis, a single line item is represented and compared as a percentage change from one base year to the subsequent years.

Requirement 2

To compute:

Percentage change between the beginning and ending cash balances for the current year.

c.

To determine

Days’ sales uncollected:

This ratio defines how fast a company converts its receivable into known amounts of cash. The lesser the ratio is, the better it is for the company as it will prove that the company employs an efficient system of cash collection from customers.

Requirement 3

To compute:

The days’ sales uncollected for both the current and prior year.

d.

To determine

Changes in Days’ sales uncollected:

The changes in the ratio of days’ sales uncollected will greatly impact the liquidity problem of the entity. If it is reduced, the company is considered to be efficiently managing its cash collection mechanism or in case, it is increased, the otherwise will follow.

Requirement 4

Whether S’s receivables collection is showing a favorable or unfavorable change.

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Answer 5

Chapter 6, Problem 3.2AA

a.

To determine

Vertical Analysis:

In vertical analysis, every line item is represented as a percentage of a base amount which can be either total assets, total liabilities, total equities, etc.

Requirement 1

To compute:

Cash as a percentage of total current assets, total current liabilities, total stockholders’ equity, and total assets for the current year and prior year.

b.

To determine

Horizontal Analysis:

In horizontal analysis, a single line item is represented and compared as a percentage change from one base year to the subsequent years.

Requirement 2

To compute:

Percentage change between the beginning and ending cash balances for the current year.

c.

To determine

Days’ sales uncollected:

This ratio defines how fast a company converts its receivable into known amounts of cash. The lesser the ratio is, the better it is for the company as it will prove that the company employs an efficient system of cash collection from customers.

Requirement 3

To compute:

The days’ sales uncollected for both the current and prior year.

d.

To determine

Changes in Days’ sales uncollected:

The changes in the ratio of days’ sales uncollected will greatly impact the liquidity problem of the entity. If it is reduced, the company is considered to be efficiently managing its cash collection mechanism or in case, it is increased, the otherwise will follow.

Requirement 4

Whether S’s receivables collection is showing a favorable or unfavorable change.

Answer 6

Chapter 6, Problem 3.2AA

a.

To determine

Vertical Analysis:

In vertical analysis, every line item is represented as a percentage of a base amount which can be either total assets, total liabilities, total equities, etc.

Requirement 1

To compute:

Cash as a percentage of total current assets, total current liabilities, total stockholders’ equity, and total assets for the current year and prior year.

Answer 7

Chapter 6, Problem 3.2AA

a.

To determine

Vertical Analysis:

In vertical analysis, every line item is represented as a percentage of a base amount which can be either total assets, total liabilities, total equities, etc.

Requirement 1

To compute:

Cash as a percentage of total current assets, total current liabilities, total stockholders’ equity, and total assets for the current year and prior year.

Answer 8

b.

To determine

Horizontal Analysis:

In horizontal analysis, a single line item is represented and compared as a percentage change from one base year to the subsequent years.

Requirement 2

To compute:

Percentage change between the beginning and ending cash balances for the current year.

Answer 9

b.

To determine

Horizontal Analysis:

In horizontal analysis, a single line item is represented and compared as a percentage change from one base year to the subsequent years.

Requirement 2

To compute:

Percentage change between the beginning and ending cash balances for the current year.

Answer 10

c.

To determine

Days’ sales uncollected:

This ratio defines how fast a company converts its receivable into known amounts of cash. The lesser the ratio is, the better it is for the company as it will prove that the company employs an efficient system of cash collection from customers.

Requirement 3

To compute:

The days’ sales uncollected for both the current and prior year.

Answer 11

c.

To determine

Days’ sales uncollected:

This ratio defines how fast a company converts its receivable into known amounts of cash. The lesser the ratio is, the better it is for the company as it will prove that the company employs an efficient system of cash collection from customers.

Requirement 3

To compute:

The days’ sales uncollected for both the current and prior year.

Answer 12

d.

To determine

Changes in Days’ sales uncollected:

The changes in the ratio of days’ sales uncollected will greatly impact the liquidity problem of the entity. If it is reduced, the company is considered to be efficiently managing its cash collection mechanism or in case, it is increased, the otherwise will follow.

Requirement 4

Whether S’s receivables collection is showing a favorable or unfavorable change.

Answer 13

d.

To determine

Changes in Days’ sales uncollected:

The changes in the ratio of days’ sales uncollected will greatly impact the liquidity problem of the entity. If it is reduced, the company is considered to be efficiently managing its cash collection mechanism or in case, it is increased, the otherwise will follow.

Requirement 4

Whether S’s receivables collection is showing a favorable or unfavorable change.

Answer 14

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Answer 17

Ch. 6 - Prob. 1QS Ch. 6 - Prob. 2QS Ch. 6 - Prob. 3QS Ch. 6 - Prob. 4QS Ch. 6 - Prob. 5QS Ch. 6 - Prob. 6QS Ch. 6 - Prob. 7QS Ch. 6 - Prob. 8QS Ch. 6 - Prob. 9QS Ch. 6 - Prob. 10QS

Horizontal Analysis: In horizontal analysis, a single line item is represented and compared as a percentage change from one base year to the subsequent years. Requirement 2 To compute: Percentage change between the beginning and ending cash balances for the current year.

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Chapter 6 Solutions

Horizontal Analysis:

In horizontal analysis, a single line item is represented and compared as a percentage change from one base year to the subsequent years.

Requirement 2

To compute:

Percentage change between the beginning and ending cash balances for the current year.