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Homework answers / question archive / Allan Hancock College - ACCT 160 1)What is the difference between a multiple-step and a single-step format of the earnings statement? Which format is the most useful for analysis?   How is a common-size income statement created? What are the two causes of an increasing or decreasing sales number? Discuss all reasons that could explain an increase or decrease in gross profit margin

Allan Hancock College - ACCT 160 1)What is the difference between a multiple-step and a single-step format of the earnings statement? Which format is the most useful for analysis?   How is a common-size income statement created? What are the two causes of an increasing or decreasing sales number? Discuss all reasons that could explain an increase or decrease in gross profit margin

Accounting

Allan Hancock College - ACCT 160

1)What is the difference between a multiple-step and a single-step format of the earnings statement? Which format is the most useful for analysis?

 

  1. How is a common-size income statement created?
  2. What are the two causes of an increasing or decreasing sales number?
  3. Discuss all reasons that could explain an increase or decrease in gross profit margin.
  4. Explain how a company could have a decreasing gross profit margin but an increasing operating profit margin.

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  1. What is an example of an industry that would need to spend a minimum amount on advertising to be competitive? On research and development?
  2. Alpha Company purchased 30% of the voting common stock of Beta Company on January 1 and paid $500,000 for the investment. Beta Company reported $100,000 of earnings for the year and paid $40,000 in cash dividends. Calculate investment income and the balance sheet investment account for Alpha Company under the cost method and under the equity method.

 

 

  1. Discuss the four items that are included in a company’s comprehensive income.

 

  1. Explain what can be found on a statement of stockholders’ equity.

 

  1. Why is the bottom line figure, net income, not necessarily a good indicator of a firm’s financial success?
  2. An excerpt from the Sun Company’s annual report is presented below. Calculating any profit measures deemed necessary, discuss the implications of the profitability of the company.

Sun Company Income Statements for the Years

 

  1. Prepare a multiple-step income statement for Jackrabbit Inc. from the following single- step statement.

 

Net sales

$1,840,000

Gain on sale of equipment

15,000

Interest income

       13,000

 

1,868,000

Costs and expenses:

 

Cost of goods sold

1,072,000

Selling expenses

270,000

General and admin. expenses

155,000

Depreciation

24,000

Equity losses

9,000

Interest expense

16,000

Income tax expense

       96,000

Net income

$ 226,000

 

 
 
 

 

 

  1. Income statements for Yarrick Company for the years ending December 31, 2013, 2012, and 2011 are shown below. Prepare a common-size income statement and analyze the profitability of the company.

Yarrick Company Income Statements for the Years

                                        Ending December 31, 2013, 2012, and 2011                     

 

 
 
 

 

(in millions)                                                   2013                2012               2011

 

 

Net sales

$237

$155

$134

Cost of goods sold

  138

    84

    72

Gross profit

$ 99

$ 71

$ 62

Sales, general, and admin. expenses

42

31

39

Research and development

    38

    33

    54

Operating profit

$ 19

$ 7

($ 31)

Income tax expense (benefit)

      7

     2

   (11)

 

Net profit

$ 12

$ 5

($ 20)

 

 
 
 

 

 

 

 

 

           

 

  1. LA Theatres Inc. has two distinct revenue sources, ticket and concession revenues. The following information from LA Theatres Inc. income statements for the past three years is available.

 

(in millions)

2013

2012

2011

Ticket revenue

$1,731

$1,642

$1,120

Concessions revenue

     792

     687

     411

Total revenue

$2,523

$2,329

$1,531

Cost of goods sold – tickets

$ 951

$ 854

$ 549

Cost of goods sold – concessions

       70

       69

       48

Total cost of goods sold

$1,021

$ 923

$ 597

Gross profit

$1,502

$1,406

$ 934

 

 
 

 

 

 

 

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