The following is a summary of information presented on the financial statements
ID: 2499205 • Letter: T
Question
The following is a summary of information presented on the financial statements of a company on December 31, 2015.
Account
2015
2014
Current Assets
$65,000
$50,000
Accounts Receivable
80,000
75,000
Merchandise Inventory
50,000
40,000
Current Liabilities
75,000
50,000
Long-term Liabilities
30,000
50,000
Common Stock
50,000
40,000
Retained Earnings
40,000
25,000
Net Sales Revenue
$525,000
$500,000
Cost of Goods Sold
400,000
395,000
Gross Profit
$125,000
$105,000
Selling Expenses
45,000
50,000
Net Income before income tax expense
$80,000
$55,000
Income tax expense
24,000
16,500
Net income
$56,000
$38,500
What would a horizontal analysis report show with respect to current liabilities?
A. a 33.3% increase in current liabilities
B. a current ratio of 0.87
C. current liabilities are 38.46% of total capital
D. a 50.00% increase in current liabilities
Account
2015
2014
Current Assets
$65,000
$50,000
Accounts Receivable
80,000
75,000
Merchandise Inventory
50,000
40,000
Current Liabilities
75,000
50,000
Long-term Liabilities
30,000
50,000
Common Stock
50,000
40,000
Retained Earnings
40,000
25,000
Net Sales Revenue
$525,000
$500,000
Cost of Goods Sold
400,000
395,000
Gross Profit
$125,000
$105,000
Selling Expenses
45,000
50,000
Net Income before income tax expense
$80,000
$55,000
Income tax expense
24,000
16,500
Net income
$56,000
$38,500
Explanation / Answer
correct option is "D" - a 50.00% increase in current liabilities
[(75000- 50000) / 50000 ] = [25000 / 50000 ] = .50 or 50%
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