23. Below are typical transactions for a company. Indicate whether each transact
ID: 2572870 • Letter: 2
Question
23. Below are typical transactions for a company. Indicate whether each transaction is classified as an operating, investing or financing activity. a. Sell common stock to investors b. Receive cash from customers. c. Sell services to customers. d. Pay for cost of advertising e. Purchase factory equipment for operations f. Pay dividends in cash to stockholders 24. Perform a vertical analysis on the Income statements of Sports Emporium and All Sports. Sports Emp 3,200,000 2,050,000 1,150,000 760,000 390,000 8,000 398,000 95,000 303,000 All Sports Sales COGS Gross profit Operating expenses Operating Income Other income (expense) Income before tax Income tax expense Net income 2,420,000 1,330,000 1,090,000 590,000 500,000 5,000 505,000 130,000 375,000Explanation / Answer
23.
Operating activities - Inflows and outflows of cash related to the production of income from continuing operations.
Investing activities - Investing in yourself or others.
Financing activities - Issuing debt or equity and paying dividends.
a. Financing activity
b. Operating activity.
c. Operating activity.
d. Operating activity.
e. Investing activity.
f. Financing activity.
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24.
In vertical common size statements a base amount which is Sales on the Income statement is valued at 100% and the elements within the statements are expressed as a percentage of the base amount.
Vertiacal analysis on the Income statement of Sports Emporium and All Sports
Sports Emp All Sports Sales 3,200,000 100% 2,420,000 100% COGS 2,050,000 64.06% 1,330,000 54.96% Gross profit 1,150,000 35.94% 1,090,000 45.04% Operating expenses 760,000 23.75% 590,000 24.38% Operating income 390,000 12.19% 500,000 20.66% Other income (expense) 8,000 0.25% 5,000 0.21% Income before tax 398,000 12.44% 505,000 20.87% Income tax expense 95,000 2.97% 130,000 5.37% Net income 303,000 9.47% 375,000 15.50%Related Questions
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