Managerial Accounting: Tools for Business Decision Making
7th Edition
ISBN: 9781119034681
Author: Weygandt
Publisher: WILEY
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Chapter 14, Problem 14.8BE
To determine
Vertical Analysis: The vertical analysis is a financial technique or tool to analyze the financial statements. In this technique, the items of the financial statements are compared with a base item and a proportion or percentage is determined.
To determine: The change in net income over the three year period.
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Comparative income statements for Pearle Company are provided:
Required:
Perform a horizontal analysis of Pearle Company's income statement by computing horizontal percentages for each item.
Note: Round your answers to 1 decimal place.
Sales
Less cost of goods sold
Gross margin
Less operating expenses
Income before taxes
Income taxes
Net income
Pearle Company
Comparitive Income Statement
Years Ended December 31,
Year 2
Year 1
$ 600,000 $ 539,700
388,700
361,650
$
211,300
113,950
97,350
42,440
54,910 $
178,050
103,770
74,280
33,412
40,868
Percentage
Change
90.0 %
%
%
%
%
%
%
Vertical analysis (common-size) percentages for Baker Company’s sales revenue, cost of goods sold, and expenses are as follows. Did Baker’s net income as a percent of sales increase, decrease, or remain unchanged over the 3-year period? Provide numerical support for your answer.
Â
Vertical Analysis
2018
2017
2016
Sales revenue
100.0%
100.0%
100.0%
Cost of goods sold
60.0
63.9
65.0
Expenses
26.0
26.6
27.5
Vertical Analysis of Income Statement
Revenue and expense data for Innovation Quarter Inc. for two recent years are as follows:
Current Year
Previous Year
Sales
Cost of merchandise sold
Selling expenses
Administrative expenses
Income tax expense
Sales
a. Prepare an income statement in comparative form, stating each item for both years as a percent of sales. If required, round percentages to one decimal place. Enter all amounts as positive numbers.
Innovation Quarter Inc.
Comparative Income Statement
For the Years Ended December 31
Current year Amount Current year Percent
$388,000 100
248,320
Cost of merchandise sold
Gross profit
Selling expenses
Administrative expenses
Total operating expenses
Income from operations
Income tax expense
$388,000
248,320
54,320
62,080
7,760
Net income
$353,000
208,270
56,480
52,950
14,120
$
54,320
62,080
7,760
%
%
%
%
%
%
%
%
%
Previous year Amount Previous year Percent
$353,000 100 âś“ %
208,270
$
56,480
52,950
14,120
%
%
%
%
%
%
%
%
Chapter 14 Solutions
Managerial Accounting: Tools for Business Decision Making
Ch. 14 - (a) Jose Ramirez believes that the analysis of...Ch. 14 - (a) Distinguish among the following bases of...Ch. 14 - Prob. 3QCh. 14 - Prob. 4QCh. 14 - Prob. 5QCh. 14 - Prob. 6QCh. 14 - Prob. 7QCh. 14 - What do the following classes of ratios measure?...Ch. 14 - What is the difference between the current ratio...Ch. 14 - Hizar Company, a retail store, has an accounts...
Ch. 14 - Which ratios should be used to help answer the...Ch. 14 - The price-earnings ratio of General Motors...Ch. 14 - What is the formula for computing the payout...Ch. 14 - Holding all other factors constant, indicate...Ch. 14 - Prob. 15QCh. 14 - Prob. 16QCh. 14 - Prob. 17QCh. 14 - Prob. 18QCh. 14 - Prob. 19QCh. 14 - Why is it important to report discontinued...Ch. 14 - You are considering investing in Wingert...Ch. 14 - Prob. 22QCh. 14 - Prob. 23QCh. 14 - You recently received a letter from your Uncle...Ch. 14 - Prob. 14.2BECh. 14 - Using the following data from the comparative...Ch. 14 - Using the same data presented above in BE14-3 for...Ch. 14 - Net income was 500,000 in 2016, 450,000 in 2017,...Ch. 14 - Prob. 14.6BECh. 14 - Prob. 14.7BECh. 14 - Prob. 14.8BECh. 14 - Prob. 14.9BECh. 14 - Prob. 14.10BECh. 14 - The following data are taken from the financial...Ch. 14 - Prob. 14.12BECh. 14 - Prob. 14.13BECh. 14 - Prob. 14.14BECh. 14 - On June 30. Holloway Corporation discontinued its...Ch. 14 - Prob. 14.1DICh. 14 - Prob. 14.2DICh. 14 - In its proposed 2017 income statement. Hrabik...Ch. 14 - Financial information for Kurzen Inc. is presented...Ch. 14 - Operating data for Navarro Corporation are...Ch. 14 - The comparative condensed balance sheets of Gurley...Ch. 14 - The comparative condensed income statements of...Ch. 14 - Suppose Nordstrom, Inc., which operates department...Ch. 14 - Keener Incorporated had the following transactions...Ch. 14 - Frizell Company has the following comparative...Ch. 14 - Prob. 14.8ECh. 14 - Prob. 14.9ECh. 14 - Prob. 14.10ECh. 14 - Wiemers Corporations comparative balance sheets...Ch. 14 - Prob. 14.12ECh. 14 - Prob. 14.13ECh. 14 - Comparative statement data for Farris Company and...Ch. 14 - The comparative statements of Painter Tool Company...Ch. 14 - Prob. 14.3APCh. 14 - Financial information for Messersmith Company is...Ch. 14 - Prob. 14.5APCh. 14 - Prob. 14.6APCh. 14 - Prob. 14.7APCh. 14 - Prob. 14.8APCh. 14 - Prob. 14.9APCh. 14 - Financial Reporting Problem: Apple Inc. Your...Ch. 14 - PepsiCos financial statements are presented at...Ch. 14 - Prob. 14.3BYPCh. 14 - As the CPA for Gandara Manufacturing Inc., you...Ch. 14 - The Management Discussion and Analysis section of...Ch. 14 - Prob. 14.6BYPCh. 14 - Dave Schonhardt, president of Schonhardt...
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