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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.
- Explain how a company could have a decreasing gross profit margin but an increasing operating profit margin.
.
- What is an example of an industry that would need to spend a minimum amount on advertising to be competitive? On research and development?
- 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.
- Discuss the four items that are included in a company’s comprehensive income.
- Explain what can be found on a statement of stockholders’ equity.
- Why is the bottom line figure, net income, not necessarily a good indicator of a firm’s financial success?
- 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
- 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 |
 |
- 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) |
 |
- 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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