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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Horizontal Analysis of Income Statements

consolidated income statements for Winged Manufacturing follow.

Chapter 12, Problem 72E, Horizontal Analysis of Income Statements consolidated income statements for Winged Manufacturing

Required:

1. Prepare common size income statements for horizontal analysis (in percentage terms, rounded to two decimal places). You do not need to include the actual dollar amounts shown above.

2. CONCEPTUAL CONNECTION Explain why net income decreased in 2018 and increased in 2019.

To determine

(a)

Introduction:

Common size income statements help to express each financial statement line item as a percentage of the base year.

To prepare:

Common Size income statement in the books of Winged Manufacturing.

Explanation

The base year is taken as 2017. Each percentage is computed by:

% of sales=Amount of 2019Amoun

To determine

(b)

Introduction:

Common size income statements help to express each financial statement line item as a percentage of the base year. Horizontal analysis is considered useful in trend analysis.

To explain:

Why net income decreased in 2018 and increased in 2019.

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