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 3.30EX
(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 Company AT’s income statement.
(b)
To determine
To prepare: The vertical analysis of Company V’s income statement.
(c)
To determine
To compare: The vertical analysis of two companies’ income statement.
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Students have asked these similar questions
b. The vertical analysis indicates that the cost of goods sold as a percent of sales
by 8 percentage points, while selling expenses
- by 4 percentage points, and administrative expenses
by 1 percentage points. Thus, net income as a percent of
sales
by 3 percentage points.
Vertical analysis
The following income statement data for AT&T Inc. and Verizon Communications Inc. were taken from their recent annual reports (in millions):
AT&T
Verizon
Revenues
$132,447
$127,079
Cost of services (expense)
60,611
49,931
Selling and marketing expense
39,697
41,016
Depreciation and other expenses
20,393
16,533
Operating income
$ 11,746
$ 19,599
Required:
a. Prepare a vertical analysis of the income statement for AT&T. Round to one decimal place.
AT&T
Income Statement
Amount
Percent
Revenues
Cost of services (expense)
Selling and marketing expense
Depreciation and other expenses
Operating income
b. Prepare a vertical analysis of the income statement for Verizon. Round to one decimal place.
Verizon
Income Statement
Amount
Percent
Revenues
Cost of services (expense)
Selling and marketing expense
Depreciation and other expenses
Operating…
Vertical Analysis of Income Statement
Revenue and expense data for Innovation Quarter Inc. for two recent years are as follows:
Current Year
Previous Year
Sales
$457,000
$407,000
Cost of goods sold
283,340
231,990
Selling expenses
68,550
69,190
Administrative expenses
77,690
65,120
Income tax expense
9,140
16,280
a. Prepare an income statement in comparative form, stating each item for both years as a percent of sales. If required, round percentages to one decimal place. Enter all amounts as positive numbers.
Innovation Quarter Inc.
Comparative Income Statement
For the Years Ended December 31
Current year Amount Current year Percent
Previous year Amount Previous year Percent
Sales
$457,000
%
$407,000
%
Cost of goods sold
283,340
231,990
%
%
%
Selling expenses
68,550
%
69,190
Administrative expenses
77,690
%
65,120
%
%
%
%
%
Income tax expense
9,140
%
16,280
%
%
%
b. The vertical analysis indicates that the cost of goods sold as a percent of sales
by 5 percentage points, while selling…
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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