(a)
Vertical analysis:
Vertical analysis is the method of financial statement analysis, and it is useful to evaluating a company’s performance and financial condition. Vertical analysis is helpful for analyzing the changes in the financial statements over the time, and comparing the each item on a financial statement with a total amount from the same statement. In the vertical analysis, the financial statements are analyzed in the following manner:
- In vertical analysis of a balance sheet, each asset item is stated as a percent of the total asset, and each liability and owner’s equity item is stated as a percent of total liabilities and owner’s equity.
- In vertical analysis of an income statement, each item of revenue and expense is stated as a percent of total revenues of the business.
To prepare: The vertical analysis of Company AT’s income statement.
(b)
To prepare: The vertical analysis of Company V’s income statement.
(c)
To compare: The vertical analysis of two companies’ income statement.
Trending nowThis is a popular solution!
Chapter 3 Solutions
Bundle: Accounting, 27th + Cengagenowv2, 2 Terms Printed Access Card
- Horizontal Analysis of the Income Statement Income statement data for Winthrop Company for two recent years ended December 31, are as follows: Current Year Previous Year Sales $897,900 $730,000 774,400 Cost of goods sold 640,000 Gross profit $123,500 $90,000 Selling expenses $35,030 $31,000 Administrative expenses 31,460 26,000 Total operating expenses $66,490 $57,000 $57,010 Income before income tax $33,000 22,800 Income tax expenses 13,200 $34,210 $19,800 Net income a. Prepare a comparative income statement with horizontal analysis, indicating the increase (decrease) for the current year when compared with the previous year. If required, round to one decimal place. Winthrop Company Comparative Income Statement For the Years Ended December 31 Current Previous Increase (Decrease) (Decrease) Percent Increase year Amount year Amount Amountarrow_forwardVertical Analysis of Income Statement Revenue and expense data for Rogan Technologies Co. are as follows: 20Y8 20Υ7 Sales $572,000 $503,000 Cost of goods sold 366,080 286,710 Selling expenses 80,080 85,510 Administrative expenses 91,520 100,600 Income tax expense 17,160 10,060 a. Prepare an income statement in comparative form, stating each item for both 20Y8 and 20Y7 as a percent of sales. If required, round percentages to one decimal place. Enter all amounts as a positive number. Rogan Technologies Co. Comparative Income Statement For the Years Ended December 31, 20Y8 and 20Y7 20Y8 Amount 20Y8 Percent 20Y7 Amount 20Y7 Percent % % % % Gross profit % % % Total operating expenses % % % Net incomearrow_forwardHorizontal Analysis of the Income Statement Income statement data for Winthrop Company for two recent years ended December 31, are as follows: Current Year Previous Year Sales $965,200 $760,000 Cost of goods sold 818,400 660,000 Gross profit $146,800 $100,000 Selling expenses $43,290 $37,000 Administrative expenses 38,750 31,000 Total operating expenses $82,040 $68,000 Income before income tax $64,760 $32,000 Income tax expenses 25,900 12,800 Net income $38,860 $19,200 a. Prepare a comparative income statement with horizontal analysis, indicating the increase (decrease) for the current year when compared with the previous year. If required, round to one decimal place. Winthrop Company Comparative Income Statement For the Years Ended December 31 Current Previous Increase Increase year year (Decrease) (Decrease) Amount Amount Amount Percent Sales $965,200 $760,000 % Cost of goods sold 818,400 660,000 % Gross profit $146,800 $100,000 % Selling expenses $43,290 $37,000 % Administrative…arrow_forward
- The following income statement data for AT&T Inc. and Verizon Communications Inc. were taken from their recent annual reports (in millions): AT&T Verizon Revenues.. $132,447 $127,079 Cost of services (expense).. 60,611 49,931 Selling and marketing expense . Depreciation and other expenses Operating income 39,697 41,016 20,393 16,533 $ 11,746 $ 19,599 a. Prepare a vertical analysis of the income statement for AT&T. Round to one decimal place. b. Prepare a vertical analysis of the income statement for Verizon. Round to one decimal place. Based on Requirements (a) and (b), how does AT&T compare to Verizon? c.arrow_forwardVertical Analysis of Income Statement Revenue and expense data for Innovation Quarter Inc. for two recent years are as follows: Current Year Previous Year Sales $4,000,000 $3,600,000 Cost of goods sold 2,280,000 1,872,000 Selling expenses 600,000 648,000 Administrative expenses 520,000 360,000 Income tax expense 240,000 216,000 a. Prepare an income statement in comparative form, stating each item for both years as a percent of sales. Round to the nearest whole percentage. Innovation Quarter Inc. Comparative Income Statement For the Years Ended December 31 Current yearAmount Current yearPercent Previous yearAmount Previous yearPercent Sales $4,000,000 % $3,600,000 % Cost of goods sold (2,280,000) % (1,872,000) % $ % $ % Selling expenses $(600,000) % $(648,000) % Administrative expenses (520,000) % (360,000) % $ % $ % $ % $ % Income tax expense (240,000) % (216,000) % $ % $ % b.…arrow_forwardVertical Analysis of Income Statement Revenue and expense data for Innovation Quarter Inc. for two recent years are as follows: Current Year Previous Year Sales $4,000,000 $3,600,000 Cost of goods sold 2,280,000 1,872,000 Selling expenses 600,000 648,000 Administrative expenses 520,000 360,000 Income tax expense 240,000 216,000 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 Previous year Amount Previous year Percent Sales $4,000,000 fill in the blank f86a69fccf96045_1% $3,600,000 fill in the blank f86a69fccf96045_2% Cost of goods sold 2,280,000 fill in the blank f86a69fccf96045_3% 1,872,000 fill in the blank f86a69fccf96045_4% $fill…arrow_forward
- Comparative income statements and balance sheets for F&N are shown below ($ millions): Year 2 Year 1 Income Statement $19,889 6,204 Net sales. $20,092 6,044 Cost of goods Gross profit. Selling, general, and administrative expense Depreciation and amortization expense Interest expense (revenue) 14,048 7,893 803 (308) 13,685 9,221 773 292 3,399 1,222 Income before tax 5,660 1,691 Income tax expense. Net income $ 3,969 $ 2,177 Outstanding shares 3,491 3,481arrow_forwardHorizontal Analysis of the Income Statement Income statement data for Winthrop Company for two recent years ended December 31, are as follows: Current Year Previous Year Sales $878,400 $720,000 Cost of goods sold 725,900 610,000 Gross profit $152,500 $110,000 Selling expenses $42,560 $38,000 Administrative expenses 38,400 32,000 Total operating expenses $80,960 $70,000 Income before income tax $71,540 $40,000 Income tax expenses 28,600 16,000 Net income $42,940 $24,000 a. Prepare a comparative income statement with horizontal analysis, indicating the increase (decrease) for the current year when compared with the previous year. If required, round to one decimal place. Winthrop Company Comparative Income Statement For the Years Ended December 31 CurrentyearAmount PreviousyearAmount Increase(Decrease)Amount Increase(Decrease)Percent Sales $878,400 $720,000 $ % Cost of goods…arrow_forwardCommon-Sized Income Statement Revenue and expense data for the current calendar year for Sorenson Electronics Company and for the electronics industry are as follows. Sorenson Electronics Company data are expressed in dollars. The electronics industry averages are expressed in percentages. SorensonElectronicsCompany ElectronicsIndustryAverage Sales $1,940,000 100 % Cost of goods sold (1,358,000) (76) Gross profit $582,000 24 % Selling expenses $(329,800) (9) % Administrative expenses (116,400) (9) Total operating expenses $(446,200) (18) % Operating income $135,800 6 % Other revenue and expense: Other revenue 38,800 4 Other expense (19,400) (3) Income before income tax $155,200 7 % Income tax expense (58,200) (5) Net income $97,000 2 % a. Prepare a common-sized income statement comparing the results of operations for Sorenson Electronics Company with the industry average. If…arrow_forward
- Horizontal Analysis of the Income Statement Income statement data for Winthrop Company for two recent years ended December 31, are as follows: Current Year Previous Year Sales $537,600 $420,000 Cost of goods sold 462,500 370,000 Gross profit $75,100 $50,000 Selling expenses $22,420 $19,000 Administrative expenses 20,160 16,000 Total operating expenses $42,580 $35,000 Income before income tax $32,520 $15,000 Income tax expenses 13,000 6,000 Net income $19,520 $9,000 a. Prepare a comparative income statement with horizontal analysis, indicating the increase (decrease) for the current year when compared with the previous year. If required, round to one decimal place. Winthrop Company Comparative Income Statement For the Years Ended December 31 CurrentyearAmount PreviousyearAmount Increase(Decrease)Amount Increase(Decrease)Percent Sales $537,600 $420,000 $fill in the blank…arrow_forwardVertical Analysis of Income Statement Revenue and expense data for Innovation Quarter Inc. for two recent years are as follows: Current Year Previous Year Sales $527,000 $448,000 Cost of merchandise sold 279,310 215,040 Selling expenses 100,130 94,080 Administrative expenses 105,400 85,120 Income tax expense 15,810 22,400 Question Content Area 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 StatementFor the Years Ended December 31 Current year Amount Current year Percent Previous year Amount Previous year Percent Sales $527,000 fill in the blank 08e5edf2efb0fbc_1% $448,000 fill in the blank 08e5edf2efb0fbc_2% Cost of merchandise sold 279,310 fill in the blank 08e5edf2efb0fbc_3% 215,040 fill in the blank 08e5edf2efb0fbc_4%…arrow_forwardHorizontal Analysis of the Income Statement Income statement data for Winthrop Company for two recent years ended December 31, are as follows: Current Year Previous Year Sales $418,200 $340,000 Cost of goods sold 350,900 290,000 Gross profit $67,300 $50,000 Selling expenses $19,210 $17,000 Administrative expenses 16,940 14,000 Total operating expenses $36,150 $31,000 Income before income tax $31,150 $19,000 Income tax expenses 12,500 7,600 Net income $18,650 $11,400 a. Prepare a comparative income statement with horizontal analysis, indicating the increase (decrease) for the current year when compared with the previous year. If required, round to one decimal place. Winthrop Company Comparative Income Statement For the Years Ended December 31 CurrentyearAmount PreviousyearAmount Increase(Decrease)Amount Increase(Decrease)Percent Sales $418,200 $340,000 $fill in the blank…arrow_forward
- Survey of Accounting (Accounting I)AccountingISBN:9781305961883Author:Carl WarrenPublisher:Cengage Learning