Concept explainers
Concept introduction:
Financial Statements:
Financial statements refer to the annual written records of the organization, which show financial affairs of the organization. In other words, we can say that annual statements that are prepared to measure the financial progress of the organization are known as financial statements.
Requirement 1:
The amount of sales and selling, general and administrative expenses for the fiscal year 2017 and 2016.
![Check Mark](/static/check-mark.png)
Answer to Problem 2AA
For company A;
Fiscal year 2017 | Fiscal year 2016 | |
Sales | $229234 millions | $215639 millions |
Selling, general and administrative expenses | $15261 millions | $14194 millions |
For company B;
Fiscal year 2017 | Fiscal year 2016 | |
Sales | $110855 millions | $90272 millions |
Selling, general and administrative expenses | $19765 millions | $17470 millions |
Explanation of Solution
Amount of sales a, general and administrative expenses for the fiscal year 2017 and fiscal year 2016 can be known with the help of consolidated statement of operations or consolidated statements of income. So, let’s check these statements of both companies.
For company A;
Fiscal year 2017 | Fiscal year 2016 | |
Sales | $229234 millions | $215639 millions |
Selling, general and administrative expenses | $15261 millions | $14194 millions |
For company B;
Fiscal year 2017 | Fiscal year 2016 | |
Sales | $110855 millions | $90272 millions |
Selling, general and administrative expenses | $19765 millions | $17470 millions |
Concept introduction:
Financial Statements:
Financial statements refer to the annual written records of the organization, which show financial affairs of the organization. In other words, we can say that annual statements that are prepared to measure the financial progress of the organization are known as financial statements.
Requirement 2:
Ratio of total sale expenses and general & administrative expenses to sales for the fiscal year 2017 and 2016
![Check Mark](/static/check-mark.png)
Answer to Problem 2AA
For company A;
Fiscal year 2017 | Fiscal year 2016 | |
Ratio of total sale expenses and general & administrative expenses to sales | 6.66% | 6.58% |
For company B;
Fiscal year 2017 | Fiscal year 2016 | |
Ratio of total selling expenses and general & administrative expenses to sales | 17.83% | 19.35% |
Explanation of Solution
Concept introduction:
Financial Statements:
Financial statements refer to the annual written records of the organization, which show financial affairs of the organization. In other words we can say that annual statements that are prepared to measure the financial progress of the organization are known as financial statements.
Requirement 3:
To explain:
The company spends more on selling, general and administrative expenses.
![Check Mark](/static/check-mark.png)
Answer to Problem 2AA
Company B, spends more on selling, general and administrative expenses as a percent of sales.
Explanation of Solution
For knowing which company spends more on selling, general and administrative expenses as a percent of sales? Let’s calculate ratio of total selling and general & administrative expenses to sales;
Hence, it is clear that company B, spends more on selling, general and administrative expenses as a percent of sales because this company hahigher ratio in 2017 and 2016.
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Chapter 7 Solutions
Managerial Accounting
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