Two income statements for Midnight Enterprises are shown below.Midnight EnterprisesIncome StatementsFor the Years Ended December 31Year 2Year 1Fees earned$674,350$520,600Operating expenses472,045338,390$202,305$182,210Operating incomea. Prepare a vertical analysis of Midnight Enterprises' income statements. If required, round percentages to the nearest whole number. Do not enter theMidnight EnterprisesIncome StatementsFor the Years Ended December 31Year 2 Amount Year 2 PercentYear 1 Amount Year 1 PercentFees earnedOperating expensesOperating incomeb. Does the vertical analysis indicate a favorable or unfavorable trend? Depreciation on equipment for the year is $4,560.(a) Record the journal entry if the company prepares adjustments once a year.(b) Record the journal entry if the company prepares adjustments on a monthly basis.

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Asked Dec 12, 2019
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Two income statements for Midnight Enterprises are shown below.
Midnight Enterprises
Income Statements
For the Years Ended December 31
Year 2
Year 1
Fees earned
$674,350
$520,600
Operating expenses
472,045
338,390
$202,305
$182,210
Operating income
a. Prepare a vertical analysis of Midnight Enterprises' income statements. If required, round percentages to the nearest whole number. Do not enter the
Midnight Enterprises
Income Statements
For the Years Ended December 31
Year 2 Amount Year 2 Percent
Year 1 Amount Year 1 Percent
Fees earned
Operating expenses
Operating income
b. Does the vertical analysis indicate a favorable or unfavorable trend?
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Two income statements for Midnight Enterprises are shown below. Midnight Enterprises Income Statements For the Years Ended December 31 Year 2 Year 1 Fees earned $674,350 $520,600 Operating expenses 472,045 338,390 $202,305 $182,210 Operating income a. Prepare a vertical analysis of Midnight Enterprises' income statements. If required, round percentages to the nearest whole number. Do not enter the Midnight Enterprises Income Statements For the Years Ended December 31 Year 2 Amount Year 2 Percent Year 1 Amount Year 1 Percent Fees earned Operating expenses Operating income b. Does the vertical analysis indicate a favorable or unfavorable trend?

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Depreciation on equipment for the year is $4,560.
(a) Record the journal entry if the company prepares adjustments once a year.
(b) Record the journal entry if the company prepares adjustments on a monthly basis.
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Depreciation on equipment for the year is $4,560. (a) Record the journal entry if the company prepares adjustments once a year. (b) Record the journal entry if the company prepares adjustments on a monthly basis.

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Expert Answer

Step 1

Under the vertical analysis, the sales or revenue is taken as 100% and all other items are taken as a percentage of revenue. This analysis shows the relative account of different account on the income statement.

Step 2

a)

Vertical analysis for M com...

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Year 2 ($) Year 1 ($) Vertical Particular Vertical analysis of year 2 analysis year 1 674,350 100 % Fees earned 520,600 338,390 100 % Operating 472,045 70 % 65 % expenses Operating 182,210 202,305 30% 35 % income

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