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Question 4: Comparative information taken from the Wells Company financial statements is shown below:                          &n

Question 4:

Comparative information taken from the Wells Company financial statements is shown below:

                                                                                                 2009                     2008    

(a)     Notes receivable                                                             20,000                15000     

(b)    Accounts receivable                                                     182,000                 140,000

(c)     Retained earnings                                                           30,000                   20,000

(d)    Income taxes payable                                                     44,000                   20,000

(e)     Sales                                                                              960,000                 750,000

(f)     Operating expenses                                                       170,000                 200,000

Instructions:

1-Using horizontal analysis, show the percentage change from 2008 to 2009 with 2008 as the base year.                                                                                                                 

2- Interpret the result that you find for sales and operating expenses.        (0.5*2 = 1 mark)

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Answer #1

Answer-1)-

WELLS COMPANY
HORIZONTAL ANALYSIS
Particulars 2009 2008 Increase/(Decrease) Percent
$ $ $ %
Notes receivable 20000 15000 5000 33.33
Accounts receivable 182000 140000 42000 30.00
Retained earnings 30000 20000 10000 50.00
Income taxes payable 44000 20000 24000 120.00
Sales 960000 750000 210000 28.00
Operating expenses 170000 200000 -30000 -15.00

2)- Sales from year 2008 to 2009 is increased by 28% and operating expenses is decreased by 15%.

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