Question

E13-3 Preparing and Interpreting a Schedule for Horizontal and Vertical Analyses [LO 13-2, LO 13-3, LO 13-5]

According to the producer price index database maintained by the Bureau of Labor Statistics, the average cost of computer equipment fell 8.1 percent between 2012 and 2013. Required: 1. Conduct a horizontal analysis by calculating the year-over-year changes in each line item, expressed in dollars and in percentages for the income statement of Computer Tycoon Inc. for the year ended December 31, 2013. (Decreases should be indicated by a minus sign. Round percentage values to 1 decimal place.)

COMPUTER TYCOON, INC. Income Statements For the Year Ended December 31 Change irn 2013 2012 Dollars Percentage Sales Revenue Cost of Goods Sold Gross Profit Selling, General, and Administrative Expenses Interest Expense Income before Income Tax Expense Income Tax Expense Net Income $ 108,000$ 132,000 74,700 57,300 38,600 515 18,185 5,800 $5,120$ 12,385 64,000 44,000 36,800 580 6,620 1,500 2-a. Conduct a vertical analysis by expressing each line as a percentage of total revenues. (Round percentage values to 1 decimal place.) COMPUTER TYCOON, INC. Income Statements For the Year Ended December 31 2013 2012 Sales Revenue Cost of Goods Sold Gross Profit Selling, General, and Administrative Expenses Interest Expense Income before Income Tax Expense Income Tax Expense Net Income 108,000 64,000 44,000 36,800 580 6,620 1,500 $ 5,120 132,000 74,700 57,300 38,600 515 18,185 5,800 % $ 12,385

2-b.	Excluding income tax, interest, and operating expenses, did Computer Tycoon earn more profit per dollar of sales in 2013 compared to 2012?
	Yes No

Answer 1

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