For a recent year, the balance sheet for The Alphabet Soup Company includes accr

Question

For a recent year, the balance sheet for The Alphabet Soup Company includes accrued expenses of $878,060. The income before taxes for The Alphabet Soup Company for the year was $860,000.

Assume the adjusting entry for $878,060 of accrued expenses was not recorded at the end of the year. By how much would income before taxes have been misstated?

What is the percentage of the misstatement in (a) to the reported income of $860,000? Round to one decimal place.

Final Question

Based on the information above, which of the following statements is correct?

-Verizon is able to generate more operating income per sales dollar because of a lower cost of services per sales dollar.

-The depreciation expense as a percentage of revenues of Verizon is higher than AT&T

-AT&T is able to generate more operating income from revenues.

-Verizon appears to be more efficient in generating operating income from revenues

AT&T and Verizon: Vertical analysis The following income statement data for AT&T Inc, and Verizon Inc, were taken from their recent annual reports (in millions) AT&T Verizon S132447 $127,079 Cost of services (expense) (60,611) (49,931) ing and marketing expense(39,697) (41,018) Depreciation and other expenses (20,393) (16,533) $11,746 $19,599 Operating income Required: A. Prepare a vertical analysis of the income statement for AT&T. Rouund to one decimal place. (Note: Use a minus sign to indicate expenses and to indicate a net loss. Due to rounding, operating income percentage may not add down) B. Prepare a vertical analysis of the income statement for Verizan. Round to one decimal place. (Note: Use a minus sign (-) to indicate expenses and to indicate a net loss. Due to rounding, operating income percentage may not add down) C. Based on the information above, which of the following statements is correct? AT&T Vertical Analysis A. Prepare a vertical analysis of the income statement for AT&T. Round to one decimal place. (Note: Use a minus sign)to indicate expenses and to indicate a net loss) However, when computing the pe one decimal For example 0.46258 would be rounded to 463 and entered as 46.3%, Duelo rounding, operating ncome percentage may not add down AT&T Amount $132,447.00 (60,61100) (39,69700) (20,393.00) $11,746.00 Percentage Revenues Cost of services (expense 4Selling and marketing expense s Depreciation and other expenses 6 Operating income (loss) Verizon Vertical Analysis 8 Prepare a vertical analysis of the income statement for Verizon, Round to one decimai place (Note: Use a minus sign( to indicate expenses and to indicafe a ne loss) However, when compiting the input to one decimal. For example, 0.46258 would be rounded to .463 and entered as 40.3%. Due to rounding, operating income percentage may not add down. Verizon Percentage 2 Revenues 3 Cost ofservices (expense) 4 Selling and marketing expense s Depreciation and other expenses 6Operating income (loss) Amount $127,079.00 (49,931.00) (41,016.00) (16,53300) $19,599.00

Explanation / Answer

Total current income $ 860,000.00 Less: Accrued Expenses $ 878,060.00 Income $ (18,060.00) The income before tax would be misstated by an amount of $ 878,060. Percentage of misstatement 102.10% A Vertical Analysis of AT & T: Revenue $ 132,447.00 100% Cost of Services $ (60,611.00) 45.8% Selling and Marketing Expenses $ (39,697.00) 30.0% Depreciation and other expenses $ (20,393.00) 15.40% Operating Income $    11,746.00 8.87% B Vertical Analysis of Verizon Revenue $ 127,079.00 100% Cost of Services $ (49,931.00) 39.3% Selling and Marketing Expenses $ (41,016.00) 32.3% Depreciation and other expenses $ (16,533.00) 13.01% Operating Income $    19,599.00 15.42% C Verizon appears to be more efficient in generating operating income from revenues.

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