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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883

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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883
Textbook Problem

Vertical analysis of income statement
Revenue and expense data for Searle Technologies Co. are as follows:

a. Prepare an income statement in comparative form, stating each item for both 20Y8 and 20Y7 as a percent of sales. Round to one decimal place.
b. Comment on the significant changes disclosed by the comparative income statement.

To determine

Concept Introduction:

Vertical Analysis:

Vertical Analysis is used to analyses the % of items in statement for a particular period as the % of total amount. Vertical Analysis is done for particular period for different items. For example analysis of % of assets as % of Total assets for a particular year is done using the Vertical analysis.

Requirement-a:

To Prepare:

A comparative income statement using Vertical analysis

Explanation

A comparative income statement using Vertical analysis is prepared as follows:

    Comparative income statement using Vertical analysis
    20Y820Y8
    $ Common Size %$ Common Size %
    A B = A / SalesC D = C / Sales
    Sales $ 900,000 100.0% $ 725,000 100.0%
    Cost of Goods sold $(558,000)-62...
To determine

Concept Introduction:

Vertical Analysis:

Vertical Analysis is used to analyses the % of items in statement for a particular period as the % of total amount. Vertical Analysis is done for particular period for different items. For example analysis of % of assets as % of Total assets for a particular year is done using the Vertical analysis.

Requirement-a:

To Indicate:

Significant changes shown by the comparative income statement

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