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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Sharon Mars, a recent graduate of Bell's accounting program, evaluated the operating performance of Carla Vista Company's six divisions. Sharon made the following presentation to Carla Vista's board of directors and suggested the Percy Division be eliminated. "If the Percy Division is eliminated," she said, "our total profits would increase by $25,300." The Other Five Divisions Percy Division Total Sales $1,663,000 $100,900 $1,763,900 Cost of goods sold 978,400 76,500 1,054,900 Gross profit 684,600 24,400 709,000 Operating expenses 528,500 49,700 578,200 Net income $156,100 $(25,300 ) $130,800 In the Percy Division, cost of goods sold is $60,100 variable and $16,400 fixed, and operating expenses are $29,100 variable and $20,600 fixed. None of the Percy Division's fixed costs will be eliminated if the division is discontinued. Is Sharon right about eliminating the Percy Division? Prepare a schedule to support your answer. (Enter negative amounts using either a negative sign preceding…

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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 16

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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.