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Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447

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BuyFindarrow_forward

Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447
Textbook Problem

a. Use the following financial information to construct a 2013 income statement with vertical analysis for Jazzline Jewelers: gross sales, $1,243,000; sales returns and allowances, $76,540; sales discounts. $21,300; merchandise inventory. Jan. 1, 2013, $654,410; merchandise inventory. Dec. 31, 2013, $413,200; net purchases. $318,000; freight in. $3,450; salaries, $92,350; rent, $83,100; depreciation. $87,700; utilities. $21,350; advertising. $130,440; insurance. $7,920; miscellaneous expenses. $105,900; and income tax. $18,580.

Jazzline Jewelers

Income Statement

For the Year Ended December 31,2013

b. The following data represent Jazzline's operating results for 2014. Prepare a comparative income statement with horizontal analysis for 2013 and 2014: gross sales. $1,286,500; sales returns and allowances. $78,950; sales discounts. $18,700; merchandise inventory. Jan. 1, 2014, $687,300; merchandise inventory. Dec. 31, 2014, $401,210; net purchases. $325,400; freight in. $3,980; salaries. $99,340; rent, $85,600; depreciation. $81,200; utilities. $21,340; advertising. $124,390; insurance. $8,700; miscellaneous expenses. $101,230; and income tax. $12,650.

Jazzline Jewelers

Comparative Income Statement

For the Years Ended December 31, 2013 and 2014

(a)

To determine

To calculate: The vertical analysis of an income statement for Jazzline Jewelers for the year December 31,2013 if gross sales are $1,243,000, sales returns and allowances is $76,540, sales discount is $21,300, merchandise inventory is Jan,1,2013 $654,410, merchandise inventory Dec.31,2015 $413,200, net purchases is $318,000, freight in is $3,450, salaries is $92,350, rent is $83,100, depreciation is $87,700, utilities is $21,350, advertising is $130,440, insurance is $7,920, miscellaneous expenses is $105,900 and income tax is $18,580.

Explanation

Given Information:

Jazzline Jewelers gross sales are $1,243,000, sales returns and allowances is $76,540, sales discount is $21,300, merchandise inventory is Jan,1,2013 $654,410, merchandise inventory Dec.31,2015 $413,200, net purchases is $318,000, freight in is $3,450, salaries is $92,350, rent is $83,100, depreciation is $87,700, utilities is $21,350, advertising is $130,440, insurance is $7,920, miscellaneous expenses is $105,900 and income tax is $18,580.

Formula used:

Follow the steps to prepare a vertical analysis of an income statement:

Step 1: Use the percentage formula, Rate=Portion÷Base, to determine the rate of each item on the income statement. Net sales items are used as base and each items as portion.

Step 2: Round each answer to the nearest tenth of a percent.

Step 3: Count the percentage of each statement item in a column to the right of the amount.

Calculation:

Consider gross sales are $1,243,000, sales returns and allowances is $76,540, sales discount is $21,300, merchandise inventory is Jan,1,2013 $654,410, merchandise inventory Dec.31,2013 $413,200, net purchases is $318,000, freight in is $3,450, salaries is $92,350, rent is $83,100, depreciation is $87,700, utilities is $21,350, advertising is $130,440, insurance is $7,920, miscellaneous expenses is $105,900 and income tax is $18,580.

Compute the net sales by substituting sales returns and allowances to $76,540 and sales discount to $21,300 and gross sales to $1,243,000.

Net sales=Gross salesSales returns and allowancessales discounts=1,243,00076,54021,300=$1,145,160

Compute percentage of gross sales by substituting gross sales to $1,243,000 and net sales to $1,145,160

%of Net sales=Gross salesNet sales=$1,243,000$1,145,160=1.085=108.5%

And,

% of Net sales=Gross salesSales returns and allowances%sales discount%=108.56.71.8=100%

Compute cost of goods sold by substituting merchandise inventory to Jan,1,2013 $654,410, net purchases to $318,000, freight in to $3,450 and merchandise inventory for Dec.31,2013 to $413,200.

Costs of goods sold=654,410+318,000+3,450413,200=975,860413,200=$562,660

% of Costs of goods sold=57.4+27.8+0.336.1=85.336.1=49.2%

Compute gross margin by substituting net sales to $1,145,160 and cost of goods sold to $562,660.

Gross Margin=Net SalesCost of goods sold=1,145,160562,660=$582,500

And,

% of Gross Margin=Net Sales%Cost of goods sold%=10049

(b)

To determine

To calculate: The comparative income sheet with horizontal analysis for Jazzline Jewellers for the year’s 2013 and 2014 if gross sales in 2014 are $1,286,500, sales returns and allowances is $78,950, sales discount is $18,700, merchandise inventory is Jan,1,2014 $687,300, merchandise inventory Dec.31,2014 $401,210, net purchases is $325,400, freight in is $3,980, salaries is $99,340, rent is $85,600, depreciation is $81,200, utilities is $21,340, advertising is $124,390, insurance is $8,700, miscellaneous expenses is $101,230 and income tax is $12,650.

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