Chapter 15.II, Problem 15RE

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8th Edition

Robert Brechner + 1 other

ISBN: 9781305585447

Textbook Problem

Prepare the following statements on separate sheets of paper.

a. Use the following financial information to construct a 2015 income statement with vertical analysis for the Sweets & Treats Candy Company, Inc.: gross sales. $2,249,000; sales returns and allowances. $143,500; sales discounts. $54,290; merchandise inventory. Jan. 1, $875,330; merchandise inventory, Dec. 31, $716,090; net purchases. $546,920; freight in, $11,320; salaries. $319,800; rent, $213,100; depreciation. $51,200; utilities. $35,660; advertising. $249,600; insurance, $39,410; administrative expenses. $91,700; miscellaneous expenses. $107,500; and income tax. $38,450.

**Sweets & Treats Candy Company, Inc.**

**Income Statement, 2015**

b. The following data represent Sweets & Treats’ operating results for 2016. Prepare a comparative income statement with horizontal analysis for 2014 and 2015: gross sales. $2,125,000; sales returns and allowances. $126,400; sales discounts. $73,380; merchandise inventory.

Jan. 1, 2016, $716,090; merchandise inventory. Dec. 31, 2016, $584,550; net purchases. $482,620; freight in. $9,220; salaries. $340,900; rent. $215,000; depreciation. $56,300; utilities. $29,690; advertising. $217,300; insurance. $39,410; administrative expenses.

$95,850; miscellaneous expenses. $102,500; and income tax. $44,530.

**Sweets & Treats Candy Company. Inc.**

**Comparative Income Statement. 2015 and 2016**

**(a)**

To determine

**To calculate:** The vertical analysis of an income statement for Sweats & Treats Candy Company, Inc. for the year December

Explanation

**Given Information:**

Sweats & Treats Candy Company, Inc. gross sales are

**Formula used:**

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

Step

Step

Step

**Calculation:**

Consider the provided information,

Compute the net sales by substituting sales returns and allowances to

Compute percentage of gross sales by substituting gross sales to

And,

Compute cost of goods sold by substituting merchandise inventory to

And,

Compute gross margin by substituting net sales to

And,

Compute Total Operating Expenses by substituting salaries to

And,

**(b)**

To determine

**To calculate:** The comparative income sheet with horizontal analysis for Sweats & Treats Candy Company, Inc. for the year’s 2015 and 2016 if gross sales in 2016 are

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