98) Following is the income statement for Lovesick Lake Group Inc., for the year ended December 31, 2011:
Lovesick Lake Group Inc.
Income Statement
For the Year Ended December 31, 2011
Net sales$3,470,000
Expenses:
Cost of goods sold$2,082,000
Selling expenses105,000
General expenses291,000
Interest expense10,000
Income tax expense265,000
Total expenses2,753,000
Net income$ 717,000
Required:
a. Prepare a vertical analysis of the income statement showing appropriate percentages for each item listed above. Round percentages to one-tenth percent.
b. What additional information would you need to determine whether these percentages are good or bad?
99) Prepare vertical analysis calculations by filling in the far right column of the following balance sheet with the appropriate percentages.
Rat Rack Corporation
Balance Sheet
December 31, 2011
2011Percent
Current assets
Cash$35,000
Accounts receivable, net42,000
Inventory61,000
Prepaid expenses7,000
Total current assets$ 145,000
Property, plant, and equipment, net45,700
Other assets20,000
Total assets$210,700
Current liabilities
Short-term borrowings$ 29,300
Accounts payable18,000
Total current liabilities$ 47,300
Long-term debt50,250
Total liabilities$ 97,550
Shareholders' equity
Common shares$100,000
Retained earnings13,150
Total shareholders' equity$113,150
Total liabilities and shareholders' equity$210,700
100) Snowy Lane Inc.
Statement of Earnings
For the Year Ended December 31, 2011
Net sales$4,880,000
Expenses:
Cost of goods sold$3,250,000
Selling expenses270,000
General expenses145,000
Interest expense8,900
Income tax expense230,000
Total expenses3,903,900
Net income$ 976,100
Required:
a. Prepare a vertical analysis of the Statement of Earnings showing appropriate percentages for each item listed above. Round percentages to one-tenth percent.
b. What additional information would you need to determine whether these percentages are good or bad?