18) If Rick’s sales increased from $40,000 to $80,000 and its cost of goods sold increased from $30,000 to $50,000, then vertical analysis based on sales would show the following for cost of goods sold for the two periods:

A) 75% and 62.5%.

B) 62.5% and 75%

C) 133.33% and 160%

D) 160% and 133.33%.

 

19) If Rick’s sales decreased from $90,000 (year 1) to $45,000 (year 2) and its cost of goods sold decreased from $30,000 (year 1) to $20,000 (year 2), then vertical analysis based on sales would show the following decreases for cost of goods sold for the two periods:

A) 33.33% and 44.44%.

B) 44.44% and 33.33%.

C) 300% and 225%.

D) None of the above.

 

20) A type of analysis that compares each item with the same item in other periods is called horizontal analysis.

 

21) A form of analysis in which each item on a report is shown as a percent of net sales is called a vertical analysis of the income statement.

 

22) Common-size statements are used to compare companies of different sizes.

23) Common-size statements deal with the percentage of change in a certain item over several years.

 

24) Using just a base year and one additional year is not sufficient to do a long-term trend analysis of accounts.

 

25) An accountant is completing a trend analysis for a company by comparing sales for years 2003 through 2013. The base year for the calculations is 2013.

26) Complete the horizontal analysis of Soopy’s Used Cars. (Round all percentages to the nearest tenth of a percent.)

 

20132012Amount Percent

of Changeof Change

Current Assets$ 75,000$ 60,000

Plant and Equipment225,000200,000

Total Assets$300,000$260,000

 

Current Liabilities$ 30,000$ 35,000

Long-term Liabilities80,00070,000

Common Stock100,000100,000

Retained Earnings90,00055,000

Total Liabilities and

  Stockholders’ Equity$300,000$260,000

 

 

 



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