Horizontal and Vertical Analysis

P1. Obras Corporation’s condensed comparative income statements and comparative balance sheets for 2014 and 2013 follow.

 

obras Corporation Comparative Income Statements

For the years ended December 31, 2014 and 2013

 

 

Â	2014	Â	2013
Net sales	$3,276,800	Â	$3,146,400
Cost of goods sold	2,088,800	Â	2,008,400
Gross margin	$1,188,000	Â	$1,138,000
Operating expenses:	Â	Â	Â
Selling expenses	$  476,800	Â	$   518,000
Administrative expenses	447,200	Â	423,200
Total operating expenses	$   924,000	Â	$   941,200
Income from operations	$   264,000	Â	$   196,800
Interest expense	65,600	Â	39,200
Income before income taxes	$   198,400	Â	$   157,600
Income taxes expense	62,400	Â	56,800
Net income	$   136,000	Â	$   100,800
Earnings per share	$         3.40	Â	$         2.52

 

(Continued)

 

 

 

 

 

 

 

 

 

 

696                                                                                                              Chapter 14: Financial Statement Analysis

 

obras Corporation Comparative Balance Sheets

December 31, 2014 and 2013
    Cash	  Assets	2014   $     81,200	Â	2013   $     40,800
Accounts receivable (net)	Â	235,600	Â	229,200
Inventory	Â	574,800	Â	594,800
Property, plant, and equipment (net)	Â	750,000	Â	720,000
Total assets	Â	$1,641,600	Â	$1,584,800
Liabilities and Stockholders’ equity

Accounts payable                                                          $   267,600                      $   477,200

Notes payable (short-term)                                               200,000                           400,000

Bonds payable                                                                    400,000                                     —

Common stock, $10 par value                                           400,000                           400,000

Retained earnings                                                              374,000                                                                                                              307,600 Total liabilities and stockholders’ equity                                                      $1,641,600                                                                                        $1,584,800

 

ReQUIReD

1.    Prepare schedules showing the amount and percentage changes from 2013 to 2014 for the comparative income statements and the balance sheets. (Round to one deci- mal place.)

2.    Prepare common-size income statements and balance sheets for 2013 and 2014. (Round to one decimal place.)

3.    aCCoUntinG ConneCtion ▶ Comment on the results in requirements 1 and 2 by identifying favorable and unfavorable changes in the components and composition of the statements.