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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883

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BuyFindarrow_forward

Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883
Textbook Problem

Common-sized income statement
Revenue and expense data for the current calendar year for Lyons Electronics Company and for the electronics industry are as follows. Lyons Electronics Company data are ex-pressed in dollars. The electronics industry averaees are expressed in percentages.


a. Prepare a common-sized income statement comparing the results of operations for Lyom Electronics Company with the industry average.
b. Comment on significant relationships revealed by the comparisons.

To determine

(a)

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 a 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.

To Prepare:

A comparative income statement using Vertical analysis

Explanation

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

    Vertical Analysis of Income Statement
    Amount %
    A (A/Sales)
    Sales $ 7,500,000 100.00%
    Cost of Goods Sold $ (4,125,000)-55.00%
    Gross Profit $ 3,375,000 45.00%
    Selling expenses $ (2,250,000)-30.00%
    Administrative expenses $ (525,000)-7...
To determine

(b)

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 a particular period for different items. For example, an analysis of % of assets as % of Total assets for a particular year is done using the Vertical analysis.

To Indicate:

Substantial relationships shown by the comparative income statement

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