Survey of Accounting - With CengageNOW 1Term
Survey of Accounting - With CengageNOW 1Term
8th Edition
ISBN: 9781337379823
Author: WARREN
Publisher: Cengage
Question
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Chapter 9, Problem 9.5E
To determine

Concept Introduction:

Horizontal Analysis:

Horizontal Analysis is used to analyze the trend of an item. Horizontal Analysis is done in different periods for example analysis of trend of sales for several years is done using the horizontal analysis.

Requirement-a:

To Prepare:

The Comparative Income Statement using horizontal analysis.

Expert Solution
Check Mark

Answer to Problem 9.5E

The Comparative Income Statement using horizontal analysis

    Horizontal Analysis of Comparative Income Statement
    Year Percentage
    Sales9.8%
    Cost of Goods Sold30.0%
    Gross Profit -25.6%
    Selling expenses10.0%
    Administrative expenses8.0%
    Total Operating expenses9.2%
    Income from operations -35.9%
    Other Revenue 15.0%
    Income before income tax-35.5%
    Income Tax Expense-35.0%
    Net Income -35.5%

Explanation of Solution

The Comparative Income Statement using horizontal analysis is prepared as follows:

    Horizontal Analysis of Comparative Income Statement
    Increase (Decrease)
    Year 20Y5 20Y4 Amount Percentage
    A B C = (A-B) C/B
    Sales $ 862,000 $ 785,000 $ 77,000 9.8%
    Cost of Goods Sold $ 650,000 $ 500,000 $ 150,000 30.0%
    Gross Profit $ 212,000 $ 285,000 $ (73,000)-25.6%
    Selling expenses $ 44,000 $ 40,000 $ 4,000 10.0%
    Administrative expenses $ 27,000 $ 25,000 $ 2,000 8.0%
    Total Operating expenses $ 71,000 $ 65,000 $ 6,000 9.2%
    Income from operations $ 141,000 $ 220,000 $ (79,000)-35.9%
    Other Revenue $ 2,300 $ 2,000 $ 300 15.0%
    Income before income tax $ 143,300 $ 222,000 $ (78,700)-35.5%
    Income Tax Expense $ 13,000 $ 20,000 $ (7,000)-35.0%
    Net Income $ 130,300 $ 202,000 $ (71,700)-35.5%
To determine

Concept Introduction:

Horizontal Analysis:

Horizontal Analysis is used to analyze the trend of a particular item. Horizontal Analysis is done for items for different periods for example sale trends for several years are found using horizontal analysis.

Requirement-a:

To Indicate:

The results from horizontal analysis.

Expert Solution
Check Mark

Answer to Problem 9.5E

The significant results from horizontal analysis are as follows:

  • Cost of goods sold has increased more as compared with sales, which has resulted in decrease in gross profit.
  • Income from operation has decreased mainly due to decrease in gross profit.

Explanation of Solution

The Comparative Income Statement using horizontal analysis is prepared as follows:

    Horizontal Analysis of Comparative Income Statement
    Increase (Decrease)
    Year 20Y5 20Y4 Amount Percentage
    A B C = (A-B) C/B
    Sales $ 862,000 $ 785,000 $ 77,000 9.8%
    Cost of Goods Sold $ 650,000 $ 500,000 $ 150,000 30.0%
    Gross Profit $ 212,000 $ 285,000 $ (73,000)-25.6%
    Selling expenses $ 44,000 $ 40,000 $ 4,000 10.0%
    Administrative expenses $ 27,000 $ 25,000 $ 2,000 8.0%
    Total Operating expenses $ 71,000 $ 65,000 $ 6,000 9.2%
    Income from operations $ 141,000 $ 220,000 $ (79,000)-35.9%
    Other Revenue $ 2,300 $ 2,000 $ 300 15.0%
    Income before income tax $ 143,300 $ 222,000 $ (78,700)-35.5%
    Income Tax Expense $ 13,000 $ 20,000 $ (7,000)-35.0%
    Net Income $ 130,300 $ 202,000 $ (71,700)-35.5%

The significant findings from the horizontal analysis are as follows:

  • Cost of goods sold has increased more as compared to sales, which has resulted in decrease in gross profit.
  • Income from operation has decreased mainly due to decrease in gross profit.

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Chapter 9 Solutions

Survey of Accounting - With CengageNOW 1Term

Ch. 9 - For Belzcr Corporation, the working capital at the...Ch. 9 - Prob. 7CDQCh. 9 - Prob. 8CDQCh. 9 - a. Why is it advantageous to have a high inventory...Ch. 9 - Prob. 10CDQCh. 9 - Prob. 11CDQCh. 9 - Prob. 12CDQCh. 9 - Prob. 13CDQCh. 9 - Prob. 14CDQCh. 9 - Prob. 15CDQCh. 9 - Favorable business conditions may bring about...Ch. 9 - Prob. 17CDQCh. 9 - Prob. 9.1ECh. 9 - Vertical analysis of income statement The...Ch. 9 - Common-sized income statement Revenue and expense...Ch. 9 - Prob. 9.4ECh. 9 - Prob. 9.5ECh. 9 - Prob. 9.6ECh. 9 - Prob. 9.7ECh. 9 - Current position analysis The bond indenture for...Ch. 9 - Accounts receivable analysis The following data...Ch. 9 - Prob. 9.10ECh. 9 - Inventory analysis The following data were...Ch. 9 - Inventory analysis Costco Wholesale Corporation...Ch. 9 - Ratio of liabilities to stockholders' equity and...Ch. 9 - Prob. 9.14ECh. 9 - Debt ratio, ratio of liabilities to stockholders'...Ch. 9 - Prob. 9.16ECh. 9 - Profitability metrics The following selected data...Ch. 9 - Profitability metrics Macy's, Inc. (M). sells...Ch. 9 - Seven metrics The following data were taken from...Ch. 9 - Prob. 9.20ECh. 9 - Prob. 9.21ECh. 9 - Prob. 9.22ECh. 9 - Unusual income statement items Assume that the...Ch. 9 - Horizontal analysis for income statement For 20Y3....Ch. 9 - Horizontal analysis for income statement For 20Y3....Ch. 9 - Prob. 9.2.1PCh. 9 - Prob. 9.2.2PCh. 9 - Effect of transactions on current position...Ch. 9 - Effect of transactions on current position...Ch. 9 - Twenty metrics of liquidity, solvency, and...Ch. 9 - Twenty metrics of liquidity, solvency, and...Ch. 9 - Twenty metrics of liquidity, solvency, and...Ch. 9 - Twenty metrics of liquidity, solvency, and...Ch. 9 - Twenty metrics of liquidity, solvency, and...Ch. 9 - Twenty metrics of liquidity, solvency, and...Ch. 9 - Prob. 9.4.7PCh. 9 - Twenty metrics of liquidity, solvency, and...Ch. 9 - Twenty metrics of liquidity, solvency, and...Ch. 9 - Twenty metrics of liquidity, solvency, and...Ch. 9 - Twenty metrics of liquidity, solvency, and...Ch. 9 - Twenty metrics of liquidity, solvency, and...Ch. 9 - Twenty metrics of liquidity, solvency, and...Ch. 9 - Twenty metrics of liquidity, solvency, and...Ch. 9 - Twenty metrics of liquidity, solvency, and...Ch. 9 - Twenty metrics of liquidity, solvency, and...Ch. 9 - Twenty metrics of liquidity, solvency, and...Ch. 9 - Twenty metrics of liquidity, solvency, and...Ch. 9 - Twenty metrics of liquidity, solvency, and...Ch. 9 - Prob. 9.4.20PCh. 9 - Trend analysis Critelli Company has provided the...Ch. 9 - Trend analysis Critelli Company has provided the...Ch. 9 - Prob. 9.1CCh. 9 - Prob. 9.2CCh. 9 - Prob. 9.3CCh. 9 - Prob. 9.4.1CCh. 9 - Prob. 9.4.2CCh. 9 - Prob. 9.4.3CCh. 9 - Comprehensive profitability and solvency analysis...Ch. 9 - Comprehensive profitability and solvency analysis...
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