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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

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.

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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