Question

The following is summary of information presented on the financial statements of a company on December...

The following is 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 current ratio of .87

B. a 33.33% increase in current liabilities

C. current liabilities are 38.46% of total capital

D. a 50.00% increase in current liabilities

Homework Answers

Answer #1

Correct answer--------------D. a 50.00% increase in current liabilities

Working

Increase (Decrease)
                     2015                    2014 Amount Percentage
Current liabilities $ 75,000 $ 50,000 $ 25,000 50.0%

.

The increase in current liability in Dollar is $25000 and it is 50% increase from 2014.

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