CORPORATION SIMULATION ACTIVITY 3: Horizontal & Vertical Analysis of Financial S
ID: 2468405 • Letter: C
Question
CORPORATION SIMULATION
ACTIVITY 3: Horizontal & Vertical Analysis of Financial Statements
TASK 1:
Using horizontal analysis, determine “dollar and percent” changes for the Balance Sheet and Income Statement
(Use the ACTIVITY3 Excel template-TASK 1 Worksheet)....See below
TASK 2:
Using vertical analysis, determine common-size comparisons for the Balance Sheet and Income Statement
(Use the ACTIVITY3 Excel template-TASK 2 Worksheet)...See below
TASK 3:
Prepare the Statement of Cash Flows for the current year using the following additional information
(Use the ACTIVITY3 Excel Template-TASK 3 Worksheet):...See below
1. Equipment with a cost of $20,000 and accumulated depreciation of $12,000 was sold for $2,000 cash. Equipment was purchased for $53,000 cash.
2. Long-term investments with a cost of $16,000 were sold for $31,000 cash. Additional investments were purchased for $28,000 cash.
3. Notes payable in the amount of $35,000 were repaid, and new notes payable in the amount of $29,000 were issued for cash.
4. Common stock was issued for $14,000 cash. 5. Cash dividends of $5,000 were paid
TASK 4:
Assuming there are no prior-period (2008) adjustments, and cash dividends of $5,000 were paid in 2009, prepare a current year Statement of Retained Earnings.
(Use the ACTIVITY3 Excel Template-TASK 4 Worksheet)...See below
BROOKE SPORTSWEAR
Comparative Income Statement
For years ended December 31, 2009 and 2008
Dollar
Percent
2009
2008
Change
Change
Sales Revenues
472,000
429,000
Cost of Goods Sold
232,000
199,000
Gross profit
240,000
230,000
Less operating expenses:
Wages expense
(142,000)
(129,000)
Insurance expense
(15,000)
(14,000)
Depreciation expense
(40,000)
(38,000)
Income from Operations
43,000
49,000
Other Income and Expenses:
Loss on sale of equipment
(6,000)
Gain on sale of investment
15,000
Interest Expense
(5,000)
(5,000)
Income before taxes
47,000
44,000
Less: Income tax expense
8,000
7,400
Net Income
39,000
36,600
BROOKE SPORTSWEAR
Comparative Balance Sheet
December 31, 2009 and 2008
Dollar
Percent
ASSETS
2009
2008
Change
Change
Current Assets:
Cash and equivalents
15,000
13,000
Accounts Receivable
53,000
46,000
Prepaid Insurance
1,000
2,000
Inventory
63,000
51,000
TOTAL Current Assets
132,000
112,000
Property, Plant & Equipment:
Land
325,000
325,000
Equipment
243,000
210,000
Accumulated Depreciation
(178,000)
(150,000)
Investments
53,000
41,000
TOTAL PP&E
443,000
426,000
TOTAL Assets
575,000
538,000
LIABILITIES
CURRENT LIABILITIES
Accounts Payable
13,000
17,000
Wages Payable
3,500
2,000
Interest Payable
1,500
1,000
Income Taxes Payable
3,000
6,000
TOTAL Current Liabilities
21,000
26,000
Long-term liabilities
Notes payable
109,000
115,000
TOTAL LIABILITIES
130,000
141,000
SHAREHOLDERS' EQUITY
Common Stock
165,000
151,000
Retained Earnings
280,000
246,000
TOTAL Stockholders' Equity
445,000
397,000
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY
575,000
538,000
BROOKE SPORTSWEAR
Comparative Income Statement
For years ended December 31, 2009 and 2008
Dollar
Percent
2009
2008
Change
Change
Sales Revenues
472,000
429,000
Cost of Goods Sold
232,000
199,000
Gross profit
240,000
230,000
Less operating expenses:
Wages expense
(142,000)
(129,000)
Insurance expense
(15,000)
(14,000)
Depreciation expense
(40,000)
(38,000)
Income from Operations
43,000
49,000
Other Income and Expenses:
Loss on sale of equipment
(6,000)
Gain on sale of investment
15,000
Interest Expense
(5,000)
(5,000)
Income before taxes
47,000
44,000
Less: Income tax expense
8,000
7,400
Net Income
39,000
36,600
BROOKE SPORTSWEAR
Comparative Balance Sheet
December 31, 2009 and 2008
Dollar
Percent
ASSETS
2009
2008
Change
Change
Current Assets:
Cash and equivalents
15,000
13,000
Accounts Receivable
53,000
46,000
Prepaid Insurance
1,000
2,000
Inventory
63,000
51,000
TOTAL Current Assets
132,000
112,000
Property, Plant & Equipment:
Land
325,000
325,000
Equipment
243,000
210,000
Accumulated Depreciation
(178,000)
(150,000)
Investments
53,000
41,000
TOTAL PP&E
443,000
426,000
TOTAL Assets
575,000
538,000
LIABILITIES
CURRENT LIABILITIES
Accounts Payable
13,000
17,000
Wages Payable
3,500
2,000
Interest Payable
1,500
1,000
Income Taxes Payable
3,000
6,000
TOTAL Current Liabilities
21,000
26,000
Long-term liabilities
Notes payable
109,000
115,000
TOTAL LIABILITIES
130,000
141,000
SHAREHOLDERS' EQUITY
Common Stock
165,000
151,000
Retained Earnings
280,000
246,000
TOTAL Stockholders' Equity
445,000
397,000
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY
575,000
538,000
Explanation / Answer
1.
Horizontal analysis:
2.
Verticles analysis:
Comparative income statement 2009 2008 Dollar change (2009 - 2008) Percentage Change (Dollar change/2008) % Sales revenue 472,000 429,000 43,000 10 Less: Cost of goods sold 232,000 199,000 33,000 17 Gross profit 240,000 230,000 10,000 4 Less: operating expenses: Wages 142,000 129,000 13,000 10 Insurance 15,000 14,000 1,000 7 Depreciation 40,000 38,000 2,000 5 Income from operations 43,000 49,000 -6,000 -12 Other income and expenses: Loss on sale of equipment 6,000 6,000 0 Gain on sale of investment 15,000 15,000 0 Interest expense 5,000 5,000 0 0 Income before taxes 47,000 44,000 3,000 7 Less: Income tax expense 8,000 7,400 600 8 Net income 39,000 36,600 2,400 7Related Questions
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