Survey of Accounting (Accounting I)
Solutions
Survey of Accounting (Accounting I)
Vertical analysis of income statement
The following comparative income statement (in thousands of dollars) for two recent years was adapted from the annual report of Speedway Motorsports. Inc. (TRK), owner and operator of several major motor speedways, such as the Atlanta, Bristol, Charlotte, Texas, and Las Vegas Motor Speedways.
a. Prepare a comparative income statement for Years 1 and 2 in vertical form, staling each item as a percent of revenues. Round to one decimal place.
b. Comment on the significant changes.
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
A comparative income statement using Vertical analysis is prepared as follows:
| Comparative income statement using Vertical analysis | ||||
| 20Y8 | 20Y8 | |||
| $ | Common Size % | $ | Common Size % | |
| A | B = A / Sales | C | D = C / Sales | |
| Sales | $ 900,000 | 100.0% | $ 725,000 | 100.0% |
| Cost of Goods sold | $(558,000) | -62... | ||
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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