Horizontal Analysis Mike Sanders is considering the purchase of Kepler Company, a firm specializing in the manufacture of office supplies. To be able to assess the financial capabilities of the company, Mike has been given the company’s financial statements for the 2 most recent years. Kepler Company Comparative Balance Sheets This Year Last Year Assets Current assets: Cash $50,000.00 $100,000.00 Accounts receivable, net 300,000.00 150,000.00 Inventory 600,000.00 400,000.00 Prepaid expenses 25,000.00 30,000.00 Total current assets $975,000.00 $680,000.00 Property and equipment, net 125,000.00 150,000.00 Total assets $1,100,000.00 $830,000.00 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $400,000.00 $290,000.00 Short-term notes payable 200,000.00 60,000.00 Total current liabilities $600,000.00 $350,000.00 Long-term bonds payable, 12% 100,000.00 150,000.00 Total liabilities $700,000.00 $500,000.00 Stockholders’ equity: Common stock (100,000 shares) 200,000.00 200,000.00 Retained earnings 200,000.00 130,000.00 Total liabilities and stockholders’ equity $1,100,000.00 $830,000.00 Kepler Company Comparative Income Statements This Year Last Year Sales $950,000.00 $900,000.00 Less: Cost of goods sold (500,000.00) (490,000.00) Gross margin $450,000.00 $410,000.00 Less operating expenses: Selling and Administrative expenses (275,000.00) (260,000.00) Operating income $175,000.00 $150,000.00 Less: Interest expense (12,000.00) (18,000.00) Net income before taxes $163,000.00 $132,000.00 Less: Income taxes (65,200.00) (52,800.00) Net income after taxes $97,800.00 $79,200.00 Less: Dividends (27,800.00) (19,200.00) Net income, retained $70,000.00 $60,000.00 Required: Question Content Area 1(a). Compute the percentage change for the balance sheet. (Note: Enter a decrease as a negative number if applicable. Round all percentages to one decimal place.) Kepler CompanyComparative Balance Sheets This Year Last Year Percentage Change Assets Current assets: Cash $50,000.00 $100,000.00 fill in the blank 0d6059faafec067_1% Accounts receivable, net 300,000.00 150,000.00 fill in the blank 0d6059faafec067_2 Inventory 600,000.00 400,000.00 fill in the blank 0d6059faafec067_3 Prepaid expenses 25,000.00 30,000.00 fill in the blank 0d6059faafec067_4 Total current assets $975,000.00 $680,000.00 fill in the blank 0d6059faafec067_5 Property and equipment, net 125,000.00 150,000.00 fill in the blank 0d6059faafec067_6 Total assets $1,100,000.00 $830,000.00 fill in the blank 0d6059faafec067_7 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $400,000.00 $290,000.00 fill in the blank 0d6059faafec067_8 Short-term notes payable 200,000.00 60,000.00 fill in the blank 0d6059faafec067_9 Total current liabilities $600,000.00 $350,000.00 fill in the blank 0d6059faafec067_10 Long-term bonds payable, 12% 100,000.00 150,000.00 fill in the blank 0d6059faafec067_11 Total liabilities $700,000.00 $500,000.00 fill in the blank 0d6059faafec067_12 Stockholders' equity: Common stock (100,000 shares) 200,000.00 200,000.00 fill in the blank 0d6059faafec067_13 Retained earnings 200,000.00 130,000.00 fill in the blank 0d6059faafec067_14 Total liabilities and stockholders’ equity $1,100,000.00 $830,000.00 fill in the blank 0d6059faafec067_15 Question Content Area 1(b). Compute the percentage change for the income statement. (Note: Round all percentages to one decimal place.) Kepler CompanyComparative Income Statements This Year Last Year Percentage Change Sales $950,000.00 $900,000.00 fill in the blank 414365fa007301d_1% Less: Cost of goods sold (500,000.00) (490,000.00) fill in the blank 414365fa007301d_2 Gross margin $450,000.00 $410,000.00 fill in the blank 414365fa007301d_3 Less operating expenses: Selling and Administrative expenses (275,000.00) (260,000.00) fill in the blank 414365fa007301d_4 Operating income $175,000.00 $150,000.00 fill in the blank 414365fa007301d_5 Less: Interest expense (12,000.00) (18,000.00) fill in the blank 414365fa007301d_6 Net income before taxes $163,000.00 $132,000.00 fill in the blank 414365fa007301d_7 Less: Income taxes (65,200.00) (52,800.00) fill in the blank 414365fa007301d_8 Net income after taxes $97,800.00 $79,200.00 fill in the blank 414365fa007301d_9 Less: Dividends (27,800.00) (19,200.00) fill in the blank 414365fa007301d_10 Net income, retained $70,000.00 $60,000.00 fill in the blank 414365fa007301d_11 Question Content Area 2. Based on the analysis completed, select "Yes" or "No" on any significant trends identified for Kepler Company. Management should take a closer look at inventory and accounts receivable Liabilities have increased because of notes payable Accounts receivable has tripled Management should take a closer look at accounts receivable and prepaid expenses Management should take a closer look at cash, prepaid expenses and property and equipment Liabilities increased due to bonds payable Management should take a closer look at retained earnings Management should take a closer look bonds payable Cash has decreased Accounts receivable has doubled Inventory has increased
Horizontal Analysis Mike Sanders is considering the purchase of Kepler Company, a firm specializing in the manufacture of office supplies. To be able to assess the financial capabilities of the company, Mike has been given the company’s financial statements for the 2 most recent years. Kepler Company Comparative Balance Sheets This Year Last Year Assets Current assets: Cash $50,000.00 $100,000.00 Accounts receivable, net 300,000.00 150,000.00 Inventory 600,000.00 400,000.00 Prepaid expenses 25,000.00 30,000.00 Total current assets $975,000.00 $680,000.00 Property and equipment, net 125,000.00 150,000.00 Total assets $1,100,000.00 $830,000.00 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $400,000.00 $290,000.00 Short-term notes payable 200,000.00 60,000.00 Total current liabilities $600,000.00 $350,000.00 Long-term bonds payable, 12% 100,000.00 150,000.00 Total liabilities $700,000.00 $500,000.00 Stockholders’ equity: Common stock (100,000 shares) 200,000.00 200,000.00 Retained earnings 200,000.00 130,000.00 Total liabilities and stockholders’ equity $1,100,000.00 $830,000.00 Kepler Company Comparative Income Statements This Year Last Year Sales $950,000.00 $900,000.00 Less: Cost of goods sold (500,000.00) (490,000.00) Gross margin $450,000.00 $410,000.00 Less operating expenses: Selling and Administrative expenses (275,000.00) (260,000.00) Operating income $175,000.00 $150,000.00 Less: Interest expense (12,000.00) (18,000.00) Net income before taxes $163,000.00 $132,000.00 Less: Income taxes (65,200.00) (52,800.00) Net income after taxes $97,800.00 $79,200.00 Less: Dividends (27,800.00) (19,200.00) Net income, retained $70,000.00 $60,000.00 Required: Question Content Area 1(a). Compute the percentage change for the balance sheet. (Note: Enter a decrease as a negative number if applicable. Round all percentages to one decimal place.) Kepler CompanyComparative Balance Sheets This Year Last Year Percentage Change Assets Current assets: Cash $50,000.00 $100,000.00 fill in the blank 0d6059faafec067_1% Accounts receivable, net 300,000.00 150,000.00 fill in the blank 0d6059faafec067_2 Inventory 600,000.00 400,000.00 fill in the blank 0d6059faafec067_3 Prepaid expenses 25,000.00 30,000.00 fill in the blank 0d6059faafec067_4 Total current assets $975,000.00 $680,000.00 fill in the blank 0d6059faafec067_5 Property and equipment, net 125,000.00 150,000.00 fill in the blank 0d6059faafec067_6 Total assets $1,100,000.00 $830,000.00 fill in the blank 0d6059faafec067_7 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $400,000.00 $290,000.00 fill in the blank 0d6059faafec067_8 Short-term notes payable 200,000.00 60,000.00 fill in the blank 0d6059faafec067_9 Total current liabilities $600,000.00 $350,000.00 fill in the blank 0d6059faafec067_10 Long-term bonds payable, 12% 100,000.00 150,000.00 fill in the blank 0d6059faafec067_11 Total liabilities $700,000.00 $500,000.00 fill in the blank 0d6059faafec067_12 Stockholders' equity: Common stock (100,000 shares) 200,000.00 200,000.00 fill in the blank 0d6059faafec067_13 Retained earnings 200,000.00 130,000.00 fill in the blank 0d6059faafec067_14 Total liabilities and stockholders’ equity $1,100,000.00 $830,000.00 fill in the blank 0d6059faafec067_15 Question Content Area 1(b). Compute the percentage change for the income statement. (Note: Round all percentages to one decimal place.) Kepler CompanyComparative Income Statements This Year Last Year Percentage Change Sales $950,000.00 $900,000.00 fill in the blank 414365fa007301d_1% Less: Cost of goods sold (500,000.00) (490,000.00) fill in the blank 414365fa007301d_2 Gross margin $450,000.00 $410,000.00 fill in the blank 414365fa007301d_3 Less operating expenses: Selling and Administrative expenses (275,000.00) (260,000.00) fill in the blank 414365fa007301d_4 Operating income $175,000.00 $150,000.00 fill in the blank 414365fa007301d_5 Less: Interest expense (12,000.00) (18,000.00) fill in the blank 414365fa007301d_6 Net income before taxes $163,000.00 $132,000.00 fill in the blank 414365fa007301d_7 Less: Income taxes (65,200.00) (52,800.00) fill in the blank 414365fa007301d_8 Net income after taxes $97,800.00 $79,200.00 fill in the blank 414365fa007301d_9 Less: Dividends (27,800.00) (19,200.00) fill in the blank 414365fa007301d_10 Net income, retained $70,000.00 $60,000.00 fill in the blank 414365fa007301d_11 Question Content Area 2. Based on the analysis completed, select "Yes" or "No" on any significant trends identified for Kepler Company. Management should take a closer look at inventory and accounts receivable Liabilities have increased because of notes payable Accounts receivable has tripled Management should take a closer look at accounts receivable and prepaid expenses Management should take a closer look at cash, prepaid expenses and property and equipment Liabilities increased due to bonds payable Management should take a closer look at retained earnings Management should take a closer look bonds payable Cash has decreased Accounts receivable has doubled Inventory has increased
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter15: Financial Statement Analysis
Section: Chapter Questions
Problem 63P: Mike Sanders is considering the purchase of Kepler Company, a firm specializing in the manufacture...
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Horizontal Analysis
Mike Sanders is considering the purchase of Kepler Company, a firm specializing in the manufacture of office supplies. To be able to assess the financial capabilities of the company, Mike has been given the company’s financial statements for the 2 most recent years.
Kepler Company
Comparative Balance SheetsThis Year Last Year Assets Current assets: Cash $50,000.00 $100,000.00 Accounts receivable , net300,000.00 150,000.00 Inventory 600,000.00 400,000.00 Prepaid expenses 25,000.00 30,000.00 Total current assets $975,000.00 $680,000.00 Property and equipment, net 125,000.00 150,000.00 Total assets $1,100,000.00 $830,000.00 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $400,000.00 $290,000.00 Short-term notes payable 200,000.00 60,000.00 Total current liabilities $600,000.00 $350,000.00 Long-term bonds payable, 12% 100,000.00 150,000.00 Total liabilities $700,000.00 $500,000.00 Stockholders’ equity: Common stock (100,000 shares) 200,000.00 200,000.00 Retained earnings 200,000.00 130,000.00 Total liabilities and stockholders’ equity $1,100,000.00 $830,000.00
Kepler Company
Comparative Income StatementsThis Year Last Year Sales $950,000.00 $900,000.00 Less: Cost of goods sold (500,000.00) (490,000.00) Gross margin $450,000.00 $410,000.00 Less operating expenses: Selling and Administrative expenses (275,000.00) (260,000.00) Operating income $175,000.00 $150,000.00 Less: Interest expense (12,000.00) (18,000.00) Net income before taxes $163,000.00 $132,000.00 Less: Income taxes (65,200.00) (52,800.00) Net income after taxes $97,800.00 $79,200.00 Less: Dividends (27,800.00) (19,200.00) Net income, retained $70,000.00 $60,000.00
Required:Question Content Area
Kepler CompanyComparative Balance Sheets1(a). Compute the percentage change for the balance sheet. (Note: Enter a decrease as a negative number if applicable. Round all percentages to one decimal place.)
This Year Last Year Percentage Change Assets Current assets: Cash $50,000.00 $100,000.00 fill in the blank 0d6059faafec067_1% Accounts receivable, net 300,000.00 150,000.00 fill in the blank 0d6059faafec067_2 Inventory 600,000.00 400,000.00 fill in the blank 0d6059faafec067_3 Prepaid expenses 25,000.00 30,000.00 fill in the blank 0d6059faafec067_4 Total current assets $975,000.00 $680,000.00 fill in the blank 0d6059faafec067_5 Property and equipment, net 125,000.00 150,000.00 fill in the blank 0d6059faafec067_6 Total assets $1,100,000.00 $830,000.00 fill in the blank 0d6059faafec067_7 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $400,000.00 $290,000.00 fill in the blank 0d6059faafec067_8 Short-term notes payable 200,000.00 60,000.00 fill in the blank 0d6059faafec067_9 Total current liabilities $600,000.00 $350,000.00 fill in the blank 0d6059faafec067_10 Long-term bonds payable, 12% 100,000.00 150,000.00 fill in the blank 0d6059faafec067_11 Total liabilities $700,000.00 $500,000.00 fill in the blank 0d6059faafec067_12 Stockholders' equity: Common stock (100,000 shares) 200,000.00 200,000.00 fill in the blank 0d6059faafec067_13 Retained earnings 200,000.00 130,000.00 fill in the blank 0d6059faafec067_14 Total liabilities and stockholders’ equity $1,100,000.00 $830,000.00 fill in the blank 0d6059faafec067_15 Question Content Area
Kepler CompanyComparative Income Statements1(b). Compute the percentage change for the income statement. (Note: Round all percentages to one decimal place.)
This Year Last Year Percentage Change Sales $950,000.00 $900,000.00 fill in the blank 414365fa007301d_1% Less: Cost of goods sold (500,000.00) (490,000.00) fill in the blank 414365fa007301d_2 Gross margin $450,000.00 $410,000.00 fill in the blank 414365fa007301d_3 Less operating expenses: Selling and Administrative expenses (275,000.00) (260,000.00) fill in the blank 414365fa007301d_4 Operating income $175,000.00 $150,000.00 fill in the blank 414365fa007301d_5 Less: Interest expense (12,000.00) (18,000.00) fill in the blank 414365fa007301d_6 Net income before taxes $163,000.00 $132,000.00 fill in the blank 414365fa007301d_7 Less: Income taxes (65,200.00) (52,800.00) fill in the blank 414365fa007301d_8 Net income after taxes $97,800.00 $79,200.00 fill in the blank 414365fa007301d_9 Less: Dividends (27,800.00) (19,200.00) fill in the blank 414365fa007301d_10 Net income, retained $70,000.00 $60,000.00 fill in the blank 414365fa007301d_11 Question Content Area
2. Based on the analysis completed, select "Yes" or "No" on any significant trends identified for Kepler Company.
Management should take a closer look at inventory and accounts receivable Liabilities have increased because of notes payable Accounts receivable has tripled Management should take a closer look at accounts receivable and prepaid expenses Management should take a closer look at cash, prepaid expenses and property and equipment Liabilities increased due to bonds payable Management should take a closer look at retained earnings Management should take a closer look bonds payable Cash has decreased Accounts receivable has doubled Inventory has increased
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