Corporate Financial Accounting
14th Edition
ISBN: 9781305653535
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Question
Chapter 2, Problem 2.4ADM
(a)
To determine
Horizontal analysis of financial statement:
In horizontal analysis of financial statement, the amount of each item of the current year financial statement is compared with the previous year financial statement. The amount of each item increased or decreased in the current financial statement, and its respective percentage can be computed by taking the earlier statement as the base.
The amount of change in millions, and the percentage of change from the year 1 to the year 2.
(b)
To determine
To discuss: The conclusions drawn from the analysis of the revenue, and the operating expenses.
(c)
To determine
To compare: The conclusions on the operating results of Corporation T and Corporation W.
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Students have asked these similar questions
Assume the following sales data for a company:
Current year $896,005
Preceding year 607,844
What is the percentage increase in sales from the preceding year to the current year (rounded to one decimal place)?
Oa. 47.4%
Ob. 15.3%
Oc. 32.2%
Od. 79.6%
Horizontal Analysis of Income Statement
The following data (in millions) are taken from the financial statements of Target Corporation:
Recent Year
Prior Year
Revenue
$72,618
$71,279
Operating expenses
68,083
66,109
Operating income
$ 4,535
$ 5,170
a. For Target Corporation, determine the amount of change in millions and the percent of change (round to one decimal place) from the prior year to the recent year for:
1. Revenue
2. Operating expenses
3. Operating income (For those boxes in which you must enter negative numbers use a minus sign.)
Amount of Change
Percent of Change
(in millions)
(round to 1 decimal place)
Increase or Decrease
1. Revenue
2. Operating expenses
3. Operating income
b. During the recent year, revenue
and operating expenses
As a result, operating income
from the prior
year.
Revenue and expense data for Young Technologies Inc. are as follows:
Year 2
Year 1
Sales
$500,000
$440,000
Cost of goods sold
325,000
242,000
Selling expenses
70,000
79,200
Administrative expenses
75,000
70,400
Income tax expense
10,500
16,400
Required:
(a)
Prepare an income statement in comparative form, stating each item for both years as an amount and as a percent of sales. Round your percentages answers to one decimal place. Enter all amounts as positive numbers.
(b)
Comment on the significant changes disclosed by the comparative income statement.
Prepare an income statement in comparative form, stating each item for both years as an amount and as a percent of sales. Round your percentages answers to one decimal place. Enter all amounts as positive numbers.
Young Technologies Inc.
Comparative Income Statement
For the Years Ended December 31, Year 2 and Year 1
1
Year 2
Year 2
Year 1
Year 1…
Chapter 2 Solutions
Corporate Financial Accounting
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