E13-3 Preparing and Interpreting a Schedule for Horizontal and Vertical Analyses
ID: 2564757 • Letter: E
Question
E13-3 Preparing and Interpreting a Schedule for Horizontal and Vertical Analyses [LO 13-2, LO 13-3, LO 13-5 According to the producer prioe index database maintained by the Bureau of Labor Statistics, the average cost of computer equipment fell 8.1 percent between 2012 and 2013. 1. Conduct a hordzontal analysis by calauleting the year-over-year changes in each line item, expressod n dollars and in percentages for the income statement of Computer Tycoon Inc. for the year ended values to 1 declmal place.) December 31, 2013. (Docreases should be indipated by a minus sign, Round percentage For the Year Ended December 31 Change in 2012D Sales Revenue Cost of Goods Sold Gross Profit Selling, General, and Administrative Expenses Inlerest Expense Income before Income Tax Expense Income Tax Expense Net Income 100,000 120,000 0,00071,500 48,500 6,00037,000 475 11,025 5,000 $ 2,500$ 6025 40,000 3 500 3,500 11 0005 2-s. Conduct a vertical aralysis by expressing each line as a percentage of total revenues. (Round percentage values to 1 decimal place COMPUTER TYCOON, INC. 6Explanation / Answer
1.
COMPUTER TYCOON INC.
Income Statements
For the Year Ended December 31
Change in Percentage = Charge in Dollars ÷ Beginning Year Balance × 100
2.a.
COMPUTER TYCOON INC.
Income Statements
For the Year Ended December 31
2013 2012
Percentage = Given Expense/Income ÷ Sales Revenue × 100
2.b. Excluding income tax, interest and operating expenses, means gross profit of Computer Tycoon.
Comparing the Gross Profit in 2013 to 2012, Computer Tycoon does not earn more profit per dollar of sales.
Answer is No.
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