According to the producer price index database maintained by the Bureau of Labor Statistics, the averagecost of computer equipment fell 3.8 percent between January and December 2016.Required:ts1. Conduct a horizontal analysis by calculating the year-over-year changes in each line item, expressed indollars and in percentages for the income statement of Computer Tycoon Inc. for the year endedDecember 31, 2016.2-a. Conduct a vertical analysis by expressing each line as a percentage of total revenues.2-b. Excluding income tax, interest, and operating expenses, did Computer Tycoon earn more profit perdollar of sales in 2016 compared to 2015?еВookHintPrintComplete this question by entering your answers in the tabs below.eferencesReq 1Reg 2AReg 2BConduct a horizontal analysis by calculating the year-over-year changes in each line item, expressed in dollars and inpercentages for the income statement of Computer Tycoon Inc. for the year ended December 31, 2016. (Decreases should beindicated by a minus sign. Round percentage values to 1 decimal place.)COMPUTER TYCOON, INC.Income StatementsFor the Year Ended December 31Change in20162015DollarsPercentageSales Revenue$114,000 $141.000%Cost of Goods Sold67,00077,100Gross Profit47,00063,900%Selling, General, and Administrative Expenses37,40039,800Interest Expense640545%Income before Income Tax Expense8,96023,555Income Tax Expense2,0006,400Net Income$6,960$17,155% According to the producer price index database maintained by the Bureau of Labor Statistics, the averagecost of computer equipment fell 3.8 percent between January and December 2016.Required:1. Conduct a horizontal analysis by calculating the year-over-year changes in each line item, expressed indollars and in percentages for the income statement of Computer Tycoon Inc. for the year endedDecember 31, 2016.2-a. Conduct a vertical analysis by expressing each line as a percentage of total revenues.2-b. Excluding income tax, interest, and operating expenses, did Computer Tycoon earn more profit perdollar of sales in 2016 compared to 2015?Complete this question by entering your answers in the tabs below.Req 1Req 2AReq 2BConduct a vertical analysis by expressing each line as a percentage of total revenues. (Round percentage values to 1 decimalplace.)COMPUTER TYCOON, INC.Income StatementsFor the Year Ended December 3120162015Sales Revenue$114,000%141,000%%%%%%%Cost of Goods Sold67,000%77,100Gross Profit47,000%63,900Selling, General, and Administrative Expenses37,400%39,800Interest Expense640%545Income before Income Tax Expense8,960%23,555Income Tax ExpenseNet Income2,000%6,400$6,960%$17,155%< Req 1Req 2B >

Solution: Introduction: Horizontal Analysis which is also known as the trend analysis. It provides a…

1. Conduct a horizontal analysis by calculating the year-over-year changes in each line item, expressed in dollars and in percentages for the income statement of Computer Tycoon Inc. for the year ended December 31, 2016. 2-a. Conduct a vertical analysis by expressing each line as a percentage of total revenues. 2-b. Excluding income tax, interest, and operating expenses, did Computer Tycoon earn more profit per dollar of sales in 2016 compared to 2015?

1. Conduct a horizontal analysis by calculating the year-over-year changes in each line item, expressed in dollars and in percentages for the income statement of Computer Tycoon Inc. for the year ended December 31, 2016. 2-a. Conduct a vertical analysis by expressing each line as a percentage of total revenues. 2-b. Excluding income tax, interest, and operating expenses, did Computer Tycoon earn more profit per dollar of sales in 2016 compared to 2015?

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter16: Financial Statement Analysis

Section: Chapter Questions

Problem 3E

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According to the producer price index database maintained by the Bureau of Labor Statistics, the average cost of computer equipment fell 3.8 percent between January and December 2018. Let's see whether these changes are reflected in the income statement of Wizard Computers for the year ended December 31, 2018. Sales Revenue Cost of Goods Sold Gross Profit Selling, General, and Administrative Expenses Interest Expense Income before Income Tax Expense Income Tax Expense Net Income Required: 2018 $ 114,000 67,000 2017 $ 141,000 77,100 47,000 63,900 37,400 39,800 640 545 8,960 2,000 23,555 6,400 $ 6,960 $ 17,155 1. Compute the times interest earned ratios for 2018 and 2017. 2. Does Wizard generate sufficient net income in both years (before taxes and interest) to cover the cost of debt financing? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the times interest earned ratios for 2018 and 2017. (Round your answers to 1 decimal place.) Times…
According to the producer price index database maintained by the Bureau of Labor Statistics, the average cost of computer equipment fell 3.8 percent between January and December 2018. Let's see whether these changes are reflected in the income statement of Gonzalez Industries for the year ended December 31, 2018. Sales Revenue Cost of Goods Sold Gross Profit Selling, General, and Administrative Expenses Interest Expense Income before Income Tax Expense Income Tax Expense Net Income Required 1 Required 2 Required 3 2018 $ 105,000 62,500 42,500 36,500 Required: 1. Compute the gross profit percentage for each year. Assuming the change from 2017 to 2018 is the beginning of a sustained trend, is Gonzalez likely to earn more or less gross profit from each dollar of sales in 2019? 2. Compute the net profit margin for each year. Did Gonzalez do a better or worse job of controlling operating expenses in 2018 relative to 2017? 550 5,450 1,500 $ 3,950 3. Gonzalez reported average net fixed assets…
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7 According to the producer price index database maintained by the Bureau of Labor Statistics, the average cost of computer equipment fell 3.8 percent between January and December 2016. Let's see whether these changes are reflected in the income statement of Computer Tycoon Inc. for the year ended December 31, 2016. 2016 2015 Sales Revenue $113,000 66,500 46,500 $139,500 76,700 62,800 Cost of Goods Sold Gross Profit Вook Selling, General, and Administrative Expenses Interest Expense Income before Income Tax Expense Income Tax Expense 37,300 39,600 630 540 Hint 8,570 2,000 $ 6,570 22,660 6,300 $ 16,360 Print Net Income erences Required: 1. Compute the gross profit percentage for each year. Assuming that the change from 2015 to 2016 is the beginning of a sustained trend, is Computer Tycoon likely to earn more or less gross profit from each dollar of sales in 2017? 2. Compute the net profit margin for each year. Given your calculations here and in requirement 1, explain whether Computer…
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