Accounting
27th Edition
ISBN: 9781337272094
Author: WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher: Cengage Learning,
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Question
Chapter 3, Problem 3.28EX
(a)
To determine
Vertical analysis:
Vertical analysis is the method of financial statement analysis, and it is useful to evaluating a company’s performance and financial condition. Vertical analysis is helpful for analyzing the changes in the financial statements over the time, and comparing the each item on a financial statement with a total amount from the same statement. In the vertical analysis, the financial statements are analyzed in the following manner:
- In vertical analysis of a balance sheet, each asset item is stated as a percent of the total asset, and each liability and owner’s equity item is stated as a percent of total liabilities and owner’s equity.
- In vertical analysis of an income statement, each item of revenue and expense is stated as a percent of total revenues of the business.
To prepare: The vertical analysis of A Incorporation’s operating income statement.
(b)
To determine
To explain: The decrease in income from operations.
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Vertical analysis
Amazon.com, Inc.is the largest Internet retailer in the United States. Amazon's income statements through income from operations for two recent years are as follows (in mH!ions):
Amazon.com,Inc.
Operating Income Statements
For the Years Ended December 31 (in millions)
Year 2
Year 1
Product sales
$70,080
$60,903
Service sales
18,908
13,549
Total sales
$88,988
$74,452
Cost of sales
$62,752
$54,181
Fulfillment
10,766
8,585
Marketing
4,332
3,133
Technology and content
9,275
6,565
General and administrative
1,552
1,129
Other operating expense (income), net
133
114
Total operating expenses
$88,810
$73,707
Income from operations
$ 178
$ 745
1.Prepare a vertical analysis of the two operating income statements.Round percentages to one decimal pl
2.Use the vertical analysis to explain the decrease in income from operations.
Vertical analysis
Amazon.com, Inc. is the largest Internet retailer in the United States. Amazon’s income statements through income from operations for two recent years are as follows (in millions):
Amazon.com, Inc.
Operating Income Statements
For the Years Ended December 31
(in millions)
Year 2
Year 1
Product sales
$70,080
$60,903
Service sales
18,908
13,549
Total sales
$88,988
$74,452
Cost of sales
$62,752
$54,181
Fulfillment
10,766
8,585
Marketing
4,332
3,133
Technology and content
9,275
6,565
General and administrative
1,552
1,129
Other operating expense (income), net
133
114
Total operating expenses
$88,810
$73,707
Income from operations
$178
$745
Required:
a. Prepare a vertical analysis of the two operating income statements. Round percentages to one decimal place.
Analyze and compare Amazon.com, Best Buy, and Walmart
The condensed income statements through operating income for Amazon.com, Inc. (AMZN), Best Buy Co., Inc. (BBY), and Walmart Inc. (WMT) for a recent fiscal year follow (in millions):
Line Item Description
Amazon
Best Buy
Walmart
Sales
$280,522
$43,638
$523,964
Cost of sales
(165,536)
(33,590)
(394,605)
Gross profit
$114,986
$10,048
$129,359
Selling, general, and administrative expenses
(100,244)
(7,998)
(108,791)
Operating expenses
(201)
(41)
0
Operating income
$14,541
$2,009
$20,568
Question Content Area
1. Prepare comparative common-sized income statements for each company. Round percentages to one decimal place. If percentages is zero, enter "0". For those boxes in which you must enter subtractive or negative numbers use a minus sign. (Example: -300)
Comparative Income statements
Line Item Description
Amazon
Best Buy
Walmart
Sales
Sales%
Sales%
Sales%
Cost of sales
Cost of sales%
Cost of…
Chapter 3 Solutions
Accounting
Ch. 3 - How are revenues and expenses reported on the...Ch. 3 - Is the matching concept related to (a) the cash...Ch. 3 - Why are adjusting entries needed at the end of an...Ch. 3 - What is the difference between adjusting entries...Ch. 3 - Identify the four different categories of...Ch. 3 - If the effect of the debit portion of an adjusting...Ch. 3 - If the effect of the credit portion of an...Ch. 3 - Does every adjusting entry affect net income for...Ch. 3 - Prob. 9DQCh. 3 - (a) Explain the purpose of the two accounts:...
Ch. 3 - Accounts requiring adjustment Indicate with a Yes...Ch. 3 - Accounts requiring adjustment Indicate with a Yes...Ch. 3 - Prob. 3.2APECh. 3 - Type of adjustment Classify the following items as...Ch. 3 - Adjustment for accrued revenues At the end of the...Ch. 3 - Adjustment for accrued expense Prospect Realty Co....Ch. 3 - Adjustment for accrued expense We-Sell Realty Co....Ch. 3 - Adjustment for unearned revenue On June 1, 2019,...Ch. 3 - Adjustment for unearned revenue The balance in the...Ch. 3 - Adjustment for prepaid expense The prepaid...Ch. 3 - Adjustment for prepaid expense The supplies...Ch. 3 - Adjustment for depreciation The estimated amount...Ch. 3 - Adjustment for depreciation The estimated amount...Ch. 3 - Effect of omitting adjustments For the year ending...Ch. 3 - Effect of omitting adjustments For the year ending...Ch. 3 - Effect of errors on adjusted trial balance For...Ch. 3 - Effect of errors on adjusted trial balance For...Ch. 3 - Vertical analysis Two income statements for...Ch. 3 - Vertical analysis Two income statements for Cornea...Ch. 3 - Classifying types of adjustments Classify the...Ch. 3 - Classifying adjusting entries The following...Ch. 3 - Adjusting entry for accrued fees At the end of the...Ch. 3 - Effect of omitting adjusting entry The adjusting...Ch. 3 - Adjusting entries for accrued salaries Garcia...Ch. 3 - Determining wages paid The wages payable and wages...Ch. 3 - Effect of omitting adjusting entry Accrued...Ch. 3 - Effect of omitting adjusting entry When preparing...Ch. 3 - Adjusting entries for unearned fees The balance in...Ch. 3 - Effect of omitting adjusting entry At the end of...Ch. 3 - Adjusting entry for supplies The balance in the...Ch. 3 - Determining supplies purchased The supplies and...Ch. 3 - Effect of omitting adjusting entry At August 31,...Ch. 3 - Adjusting entries for prepaid insurance The...Ch. 3 - Adjusting entries for prepaid insurance The...Ch. 3 - Adjusting entries for unearned and accrued fees...Ch. 3 - Adjusting entries for prepaid and accrued taxes...Ch. 3 - Adjustment for depreciation The estimated amount...Ch. 3 - Determining fixed asset's book value The balance...Ch. 3 - Book value of fixed assets In a recent balance...Ch. 3 - Effects of errors on financial statements For a...Ch. 3 - Effects of errors on financial statements For a...Ch. 3 - Effects of errors on financial statements The...Ch. 3 - Effects of errors on financial statements If the...Ch. 3 - Adjusting entries for depreciation; effect of...Ch. 3 - Adjusting entries from trial balances The...Ch. 3 - Adjusting entries from trial balances The...Ch. 3 - Prob. 3.28EXCh. 3 - Prob. 3.29EXCh. 3 - Prob. 3.30EXCh. 3 - Adjusting entries On December 31, the following...Ch. 3 - Prob. 3.2APRCh. 3 - Adjusting entries Milbank Repairs Service, an...Ch. 3 - Adjusting entries Good Note Company specializes in...Ch. 3 - Adjusting entries and adjusted trial balances...Ch. 3 - Adjusting entries and errors At the end of April,...Ch. 3 - Adjusting entries On May 31, the following data...Ch. 3 - Prob. 3.2BPRCh. 3 - Adjusting entries Crazy Mountain Outfitters Co.,...Ch. 3 - Adjusting entries The Signage Company specializes...Ch. 3 - Adjusting entries and adjusted trial balances...Ch. 3 - Prob. 3.6BPRCh. 3 - The unadjusted trial balance that you prepared for...Ch. 3 - Prob. 3.1CPCh. 3 - Ethics in Action Daryl Kirby opened Squid Realty...Ch. 3 - Prob. 3.4CPCh. 3 - Prob. 3.5CP
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