Question

Exercise 12-63
Horizontal Analysis using Income Statements

The consolidated 2011, 2010, and 2009 income statements for Corcoran Inc. and Subsidiaries follow.

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Hide 1. Prepare common size income statements for horizontal analysis. Enter your answers in percentage terms, rounded to two decimal places, and do not include the "%" sign with your answer. For example, "100.00" or "28.72". You do not need to include the actual dollar amounts shown above. Corcoran Inc. and Subsidiaries Consolidated Income Statements December 31, 2011 December 31, 2010 December 31, 2009   %   %   % Costs and expenses:   %   %   %   %   %   %   %   %   % Income from operations   %   %   %   %   %   %   %   %   %   %   %   %   %   %   % Net income   %   %   %

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Set up all three years side by side in income statement form. Start with 2009, setting 100% for every line amount. Then the corresponding amount in the other years is compared to the base year. For example 2011, cost of goods sold = 11,946,100/9,366,200= 127.54%.

2. Indicate what Corcoran's 2011, 2010, and 2009 tax rates were on its income before taxes. Round your answers to two decimal places.

2011	%
2010	%
2009	%

Answer 1

1)Answer  

  Corcoran Inc. and Subsidiaries

  Consolidated Income Statement

Common Size Income Statement for Horizontal Analysis(percentage terms) for the year 2009,2010 and 2011

Description	31-12-2011	31-12-2010	31-12-2009
Net Sales	100	100	100
Cost and Expenses:
a)Cost of Goods Sold	(47.74)	(48.31)	(48.55)
b)Selling,General and Administrative expenses	(39.42)	(39.69)	(39.42)
c)Amortization of Intangible Assets	(1.21)	(1.21)	(1.08)
Operating Profit	11.63	10.79	10.95
Interest Expense	(2.29)	(2.68)	(3.18)
Interest Income	0.35	0.52	0.83
Income Before Income Taxes	9.69	8.63	8.60
Provision for Income Taxes	(3.34)	(2.72)	(3.10)
Net Income	6.35	5.91	5.5

2)Answer

Tax Rates On its Income Before Taxes

2011	34.45
2010	31.52
2009	36.04