Horizontal analysis of income statement For 20V2, McDade Company reported a decline in net income. At the end of the year, T. Burrows, the president, is presented with the following condensed comparative income statement: McDade Company Comparative Income Statement For the Years Ended December 31,20Y2 and 20Y1 20Y2 20Y1 Sales $16,800,000 15,000,000 Cost of goods sold 11,500,000 10,000,000 Gross profit $5,300,000 $5,000,000 Selling expenses $1,770,000 $1,500,000 Administrative expenses 1,220,000 1,000,000 Total operating expenses $2,990,000 $2,500,000 Income from operations $2,310,000 $2,500,000 Other income 256,950 225,000 Income before income tax $2,556,950 $2,725,000 Income tax expense 1,413,000 1,500,000 Net income $1,153,950 $1,225,000 Instructions 1. Prepare a comparative income statement with horizontal analysis for the two-year period, using 20Y1 as the base year. (Round percentages to one decimal place.) 2. To the extent the data permit, comment on the significant relationships revealed by the horizontal analysis prepared in (1).

BuyFind

Corporate Financial Accounting

15th Edition
Carl Warren + 1 other
Publisher: Cengage Learning
ISBN: 9781337398169
BuyFind

Corporate Financial Accounting

15th Edition
Carl Warren + 1 other
Publisher: Cengage Learning
ISBN: 9781337398169
Chapter 14, Problem 14.1APR
Textbook Problem

Horizontal analysis of income statement

For 20V2, McDade Company reported a decline in net income. At the end of the year, T. Burrows, the president, is presented with the following condensed comparative income statement:

McDade Company

Comparative Income Statement

For the Years Ended December 31,20Y2 and 20Y1

  20Y2 20Y1
Sales $16,800,000 15,000,000
Cost of goods sold 11,500,000 10,000,000
Gross profit $5,300,000 $5,000,000
Selling expenses $1,770,000 $1,500,000
Administrative expenses 1,220,000 1,000,000
Total operating expenses $2,990,000 $2,500,000
Income from operations $2,310,000 $2,500,000
Other income 256,950 225,000
Income before income tax $2,556,950 $2,725,000
Income tax expense 1,413,000 1,500,000
Net income $1,153,950 $1,225,000

Instructions

  1. 1. Prepare a comparative income statement with horizontal analysis for the two-year period, using 20Y1 as the base year. (Round percentages to one decimal place.)
  2. 2. To the extent the data permit, comment on the significant relationships revealed by the horizontal analysis prepared in (1).

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Chapter 14 Solutions

Corporate Financial Accounting
Ch. 14 - Horizontal analysis The comparative accounts...Ch. 14 - Vertical analysis Income statement information for...Ch. 14 - Current position analysis The following items are...Ch. 14 - Accounts receivable analysis A company reports the...Ch. 14 - Inventory analysis A company reports the...Ch. 14 - Long-term solvency analysis The following...Ch. 14 - To determine: Times interest earned ratio Given...Ch. 14 - Asset turnover A company reports the following:...Ch. 14 - Return on total assets A company reports the...Ch. 14 - Common stockholders profitability analysis A...Ch. 14 - Earnings per share and price-earnings ratio A...Ch. 14 - Vertical analysis of income statement Revenue and...Ch. 14 - a Current fiscal year income from continuing...Ch. 14 - Common-sized income statement Revenue and expense...Ch. 14 - Vertical analysis of balance sheet Balance shed...Ch. 14 - a. Net income increase, 78,0% Horizontal analysis...Ch. 14 - a. (1) Current year working capital. 1,090,000...Ch. 14 - a. (1) Current years current ratio. 1,3 Current...Ch. 14 - Current position analysis The bond indenture for...Ch. 14 - Accounts receivable analysis The following data...Ch. 14 - Accounts receivable analysis Xavier Stores Company...Ch. 14 - Inventory analysis The following data were...Ch. 14 - Inventory analysis QT, Inc. and Elppa Computers,...Ch. 14 - Ratio of liabilities to stockholders' equity and...Ch. 14 - a. Hasbro, 1.7 Ratio of liabilities to...Ch. 14 - a. Mondelez International Inc., 1.4 Ratio of...Ch. 14 - a. YRC, 2.6 Asset turnover Three major segments of...Ch. 14 - Profitability ratios The following selected data...Ch. 14 - a. Year 3 return on total assets. 6.8%...Ch. 14 - Six measures of solvency or profitability The...Ch. 14 - Five measures of solvency or profitability The...Ch. 14 - Earnings per share, price-earnings ratio, dividend...Ch. 14 - a. Alphabet, 37.9 Price-earnings ratio; dividend...Ch. 14 - Earnings per share, discontinued operations The...Ch. 14 - Income statement and earnings per share for...Ch. 14 - Unusual items Explain whether Colston Company...Ch. 14 - Comprehensive Income Anson Industries, Inc....Ch. 14 - Horizontal analysis of income statement For 20V2,...Ch. 14 - Vertical analysis of income statement For 20Y2,...Ch. 14 - Effect of transactions on current position...Ch. 14 - Measures of liquidity, solvency, and profitability...Ch. 14 - Solvency and profitability trend analysis Addai...Ch. 14 - Horizontal analysis of income statement For 20Y2,...Ch. 14 - Vertical analysis of income statement For 20Y2,...Ch. 14 - Effect of transactions on current position...Ch. 14 - Measures of liquidity, solvency and profitability...Ch. 14 - Solvency and profitability trend analysis Crosby...Ch. 14 - Analyze and compare Amazon.com, Best Buy, and...Ch. 14 - Analyze and compare Alphabet, PepsiCo, and...Ch. 14 - Analyze Deere Company Deere Company (DE)...Ch. 14 - Analyze and compare Marriott and Hyatt Marriott...Ch. 14 - Ethics in Action Rodgers Industries Inc. completed...Ch. 14 - Communication The president of Freeman Industries...

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