Horngren's Financial & Managerial Accounting, The Financial Chapters (Book & Access Card)
5th Edition
ISBN: 9780134078939
Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura
Publisher: PEARSON
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Textbook Question
Chapter 15, Problem 15.5SE
Preparing common-size income statement
Data for Martinez, Inc. and Rosario Corp. follow:
| Martinez | Rosario | |
| Net Sales | $ 10,000 | $ 17,000 |
| Cost of Goods Sold | 6,210 | 12,359 |
| Other Expenses | 3,180 | 3,825 |
| Net Income | $ 610 | $ 816 |
Requirements
1. Prepare common-size income statements.
2. Which company earns more net income?
3. Which company's net income is a higher percentage of its net sales?
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a. Prepare a common-sized income statement comparing the results of operations for Dawg Electronics Company with the industry average. If required, round percentages to
one decimal place.
Dawg Electronics Company
Common-Sized Income Statement
Dawg Electronics Dawg Electronics
Electronics Industry
Company Amount Company Percent
Average
Sales
$3,750,000
100.0 %
100.0%
Cost of goods sold
(2,062,500)
550.0 %
(61.0)%
Gross profit
$1,687,500
45.0 %
39.0%
Selling expenses
$(1,125,000)
0.3 %
(23.0)%
Administrative expenses
(262,500)
0.7 %
(10.0)%
Total operating expenses
$(1,387,500)
37.0 %
(33.0)%
Operating income
$300,000
8.0 %
6.0%
Other revenue and expense:
Other revenue
15,000
0.4 %
3.0%
Other expense
(3,750)
0.1 %
(1.0)%
Income before income tax
$311,250
8.3 %
8.0%
Income tax expense
(93,750)
25 %
(2.5)%
Net income
$217,500
5.8 %
5.5%
Consider the following income statement data from the Ross Company:
Current Year Prior Year
$962,500
$720,000
582,960
440,820
182,175
156,420
104,100
79,000
13,533
8,532
Sales revenue
Cost of goods sold
Selling expenses
Administrative expenses
Income tax expense
Prepare a comparative income statement, showing increases and decreases in dollars and in percentages.
(Round percentages to one decimal.)
Ross Company
Comparative Income Statements
Sales revenue
Cost of goods sold
Gross profit on sales
Operating expenses
Selling expenses
Administrative expenses
Total
Income before income taxes
Income tax expense
Net income
$
$
LA
Current
Year
Prior Year (Decrease)
$
$
Increase Percent
Change
$
LA
Compare Martinez and Rosado by converting their income statements to common size.
Net sales....
Cost of goods sold.
Other expense.
Net income..
Which company earns more net income? Which company's net income is a higher percentage of its net sales?
Net sales...
Cost of goods sold.
Other expenses.
Net income..
$
$
$
$
Martinez
Prepare the common-sized financial analysis: (Round percentages to the nearest tenth percent.)
Martinez
Amount
10,900
6,660
3,586
654
10,900 $
6,660
3,586
%
654 $
% $
%
%
Rosado
%
$
16,540
11,909
3,837
794
Rosado
Amount
16,540
11,909
3,837
794
%
do do
%
%
%
%
Chapter 15 Solutions
Horngren's Financial & Managerial Accounting, The Financial Chapters (Book & Access Card)
Ch. 15 - What part of the Libertys annual report is written...Ch. 15 - Horizontal analysis of Liberty's balance sheet for...Ch. 15 - Vertical analysis of Liberty's balance sheet for...Ch. 15 - Which statement best describes Liberty's acid-test...Ch. 15 - Liberty's inventory turnover during 2017 was...Ch. 15 - Prob. 6QCCh. 15 - Prob. 7QCCh. 15 - Liberty's rate of return on common stockholders'...Ch. 15 - The company has 2,500 shares of common stock...Ch. 15 - Prob. 10AQC
Ch. 15 - What ate the three main ways to analyze financial...Ch. 15 - What is an annual report? Briefly describe the key...Ch. 15 - Prob. 3RQCh. 15 - What is trend analysis, and how does it differ...Ch. 15 - Prob. 5RQCh. 15 - Prob. 6RQCh. 15 - Prob. 7RQCh. 15 - Briefly describe the ratios that can be used to...Ch. 15 - Prob. 9RQCh. 15 - Briefly describe the ratios that can be used to...Ch. 15 - Briefly describe the ratios that can be used to...Ch. 15 - Prob. 12RQCh. 15 - Prob. 13RQCh. 15 - Prob. 14RQCh. 15 - Prob. 15RQCh. 15 - Prob. 15.1SECh. 15 - Performing horizontal analysis McDonald Corp....Ch. 15 - Calculating trend analysis Variline Corp. reported...Ch. 15 - Performing vertical analysis Hoosier Optical...Ch. 15 - Preparing common-size income statement Data for...Ch. 15 - Shine's Companies, a home improvement store chain,...Ch. 15 - Shine's Companies, a home improvement store chain,...Ch. 15 - Shine's Companies, a home improvement store chain,...Ch. 15 - Prob. 15.9SECh. 15 - Prob. 15.10SECh. 15 - Prob. 15.11SECh. 15 - Using ratios to reconstruct a balance sheet...Ch. 15 - Prob. 15.13SECh. 15 - Prob. 15.14SECh. 15 - Prob. 15.15ECh. 15 - Computing trend analysis Grand Oaks Realty's net...Ch. 15 - Prob. 15.17ECh. 15 - Prob. 15.18ECh. 15 - Prob. 15.19ECh. 15 - Prob. 15.20ECh. 15 - Analyzing the ability to pay liabilities Big Bend...Ch. 15 - Analyzing profitability Varsity, Inc.s comparative...Ch. 15 - Prob. 15.23ECh. 15 - Using ratios to reconstruct a balance sheet The...Ch. 15 - Prob. 15.25ECh. 15 - Computing earnings per share Falconi Academy...Ch. 15 - Prob. 15.27APCh. 15 - Prob. 15.28APCh. 15 - Prob. 15.29APCh. 15 - Prob. 15.30APCh. 15 - Using ratios to evaluate a stock investment...Ch. 15 - Prob. 15.32APCh. 15 - Preparing an income statement The following...Ch. 15 - Computing trend analysis and return on common...Ch. 15 - Prob. 15.35BPCh. 15 - Prob. 15.36BPCh. 15 - Determining the effects of business transactions...Ch. 15 - Prob. 15.38BPCh. 15 - Prob. 15.39BPCh. 15 - Prob. 15.40BPCh. 15 - Prob. 15.41CPCh. 15 - Lance Berkman is the controller of Saturn, a dance...Ch. 15 - Prob. 15.1CTEI
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