BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

Solutions

Chapter
Section
BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
5 views

Preparation of Common Size Statements for Vertical Analysis

Financial statements for Steele Inc. follow.

Chapter 12, Problem 76E, Preparation of Common Size Statements for Vertical Analysis Financial statements for Steele Inc. , example  1

Chapter 12, Problem 76E, Preparation of Common Size Statements for Vertical Analysis Financial statements for Steele Inc. , example  2

Chapter 12, Problem 76E, Preparation of Common Size Statements for Vertical Analysis Financial statements for Steele Inc. , example  3

Required:

1. Prepare common size income statements and balance sheets for Steele to be used in vertical analysis (in percentage terms, rounded to two decimal places). You do not need to include the actual dollar amounts shown above.

2. CONCEPTUAL CONNECTION Indicate whether gross margin grew as much as sales between 2017 and 2018 and between 2018 and 2019, and, if so, why it grew.

3. CONCEPTUAL CONNECTION Indicate whether the relative proportion of Steele’s assets changed between 2018 and 2019, and. if so, explain the change.

4. CONCEPTUAL CONNECTION Indicate whether the relative proportion of Steele’s liabilities and equity changed between 2018 and 2019, and. if so. explain the change.

5. CONCEPTUAL CONNECTION Explain how Steele appears to have financed the 7.5% increase in assets that occurred between 2018 and 2019.

To determine

(a)

Introduction:

Under vertical analysis, each item of financial statement is shown as a percent of the highest amount available on the same statement.

To prepare:

Common size financial statements for vertical analysis.

Explanation

COMMON SIZE INCOME STATEMENT

Particulars 2019 2018 2017
Net Sales $7,245,088$7,245,088×100 = 100% $6,944,296$6,944,296×100 = 100% $6,149,218$6,149,218×100 = 100%
Cost of Goods Sold $5,286,253$7,245,088×100 = 72.96% $4,953,556$6,944,296×100 = 71.33% $4,355,675$6,149,218×100 = 70.83%
Gross Margin $1,958,835$7,245,088×100 = 27.04 $1,990,740$6,944,296×100 = 28.67% $1,793,543$6,149,218×100 = 29.17%
General and administrative expenses $1,259,896$7,245,088×100 = 17.39% $1,202,042$6,944,296×100 = 17.31% $1,080,843$6,149,218×100 = 17.58%
Special and nonrecurring items $2,617$7,245,088×100 = 0.04% $0$6,944,296×100 = 0 $0$6,149,218×100 = 0
Operating Income $701,556$7,245,088×100 = 9.69% $788,698$6,944,296×100 = 11.36% $712,700$6,149,218×100 = 11.59%
Interest expense $63,685$7,245,088×100 = 0.89% $62,398$6,944,296×100 = 0.90% $63,927$6,149,218×100 = 1.04%
Other Income $7,308$7,245,088×100 = 0.10% $10,080$6,944,296×100 = 0.15% $11,529$6,149,218×100 = 0.19%
Gain on Sale of Investments $0$7,245,088×100 = 0 $9,117$6,944,296×100 = 0.13% $0$6,149,218×100 = 0
Income for income taxes $645,179$7,245,088×100 = 8.91% $745,497$6,944,296×100 = 10.74% $660,302$6,149,218×100 = 10.74%
Provision for income taxes $254,000$7,245,088×100 = 3.51% $290,000$6,944,296×100 = 4.18% $257,000$6,149,218×100 = 4.18%
Net Income $391,179$7,245,088×100 = 5.40% $455,497$6,944,296×100 = 6.56% $403,302$6,149,218×100 = 6.56%

COMMON SIZE BALANCE SHEET

ASSETS Dec 31, 2019 Dec 31, 2018
Current Assets:
Cash and equivalents $320,558$4,135,105×100 = 7.75% $41,235$3,846,450×100 = 1.07%
Accounts Receivable $1,056,911$4,135,105×100 = 25.56% $837,377$3,846,450×100 = 21.77%
Inventories $733,700$4,135,105×100 = 17.74% $803,707$3,846,450×100 = 20.89%
Other $109,456$4,135,105×100 = 2
To determine

(b)

Introduction:

When a company holds 50% or more of the common stock of another company then both the companies are treated as a single entity. In such a case, consolidated statements are prepared.

To compare:

The growth in gross margin and sales between year 2017 and 2018, 2018 and 2019.

To determine

(c)

Introduction:

When a company holds 50% or more of the common stock of another company then both the companies are treated as a single entity. In such a case, consolidated statements are prepared.

To compare:

Relative proportion of assets between 2018 and 2019.

To determine

(d)

Introduction:

When a company holds 50% or more of the common stock of another company then both the companies are treated as a single entity. In such a case, consolidated statements are prepared.

To compare:

Relative proportion of liabilities and equity between 2018 and 2019.

To determine

(d)

Introduction:

When a company holds 50% or more of the common stock of another company then both the companies are treated as a single entity. In such a case, consolidated statements are prepared.

The source of finance for the increased value of asset.

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Chapter 12 Solutions

Show all chapter solutions add
Ch-12 P-11DQCh-12 P-12DQCh-12 P-13DQCh-12 P-14DQCh-12 P-15DQCh-12 P-16DQCh-12 P-1MCQCh-12 P-2MCQCh-12 P-3MCQCh-12 P-4MCQCh-12 P-5MCQCh-12 P-6MCQCh-12 P-7MCQCh-12 P-8MCQCh-12 P-9MCQCh-12 P-10MCQCh-12 P-11MCQCh-12 P-12MCQCh-12 P-13MCQCh-12 P-14MCQCh-12 P-15MCQCh-12 P-16MCQCh-12 P-17MCQCh-12 P-18MCQCh-12 P-19MCQCh-12 P-20MCQCh-12 P-21MCQCh-12 P-22MCQCh-12 P-23MCQCh-12 P-24MCQCh-12 P-25MCQCh-12 P-26MCQCh-12 P-27MCQCh-12 P-28MCQCh-12 P-29MCQCh-12 P-30MCQCh-12 P-31MCQCh-12 P-32MCQCh-12 P-33MCQCh-12 P-34MCQCh-12 P-35MCQCh-12 P-36MCQCh-12 P-37MCQCh-12 P-38MCQCh-12 P-39MCQCh-12 P-40MCQCh-12 P-41MCQCh-12 P-42MCQCh-12 P-43MCQCh-12 P-44MCQCh-12 P-45MCQCh-12 P-46CECh-12 P-47CECh-12 P-48CECh-12 P-49CECh-12 P-50CECh-12 P-51CECh-12 P-52CECh-12 P-53CECh-12 P-54CECh-12 P-55CECh-12 P-56CECh-12 P-57BECh-12 P-58BECh-12 P-59BECh-12 P-60BECh-12 P-61BECh-12 P-62BECh-12 P-63BECh-12 P-64BECh-12 P-65BECh-12 P-66BECh-12 P-67BECh-12 P-68ECh-12 P-69ECh-12 P-70ECh-12 P-71ECh-12 P-72ECh-12 P-73ECh-12 P-74ECh-12 P-75ECh-12 P-76ECh-12 P-77ECh-12 P-78ECh-12 P-79ECh-12 P-80ECh-12 P-81ECh-12 P-82ECh-12 P-83ECh-12 P-84PSACh-12 P-85PSACh-12 P-86PSACh-12 P-87PSACh-12 P-88PSACh-12 P-89PSACh-12 P-90PSACh-12 P-91PSACh-12 P-92PSACh-12 P-93PSACh-12 P-84PSBCh-12 P-85PSBCh-12 P-86PSBCh-12 P-87PSBCh-12 P-88PSBCh-12 P-89PSBCh-12 P-90PSBCh-12 P-91PSBCh-12 P-92PSBCh-12 P-93PSBCh-12 P-94CCh-12 P-95.1CCh-12 P-95.2CCh-12 P-96.1CCh-12 P-96.2CCh-12 P-97.1CCh-12 P-97.2CCh-12 P-97.3CCh-12 P-97.4CCh-12 P-97.5CCh-12 P-97.6CCh-12 P-98.1CCh-12 P-98.2CCh-12 P-98.3CCh-12 P-99.1CCh-12 P-99.2CCh-12 P-99.3CCh-12 P-99.4CCh-12 P-99.5C

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

What are the main objectives of performance appraisal?

Foundations of Business (MindTap Course List)

What is a sacrificial host? What is a bastion host?

Principles of Information Security (MindTap Course List)

The Body Mass Index (BMI) is a way of determining obesity and whether someone is overweight. It is computed fro...

Engineering Fundamentals: An Introduction to Engineering (MindTap Course List)

What is PPE?

Precision Machining Technology (MindTap Course List)

Describe the following: 4GLs, classic programming languages, application generators, and macros. Explain how to...

Enhanced Discovering Computers 2017 (Shelly Cashman Series) (MindTap Course List)