Question

- Which of the following is an example of vertical analysis?

A. Comparing income statement items as a percentage of sales.

B. Comparing the change in sales over time.

C. Comparing debt with industry averages.

D. Comparing gross profit across companies.

- When a company issues 30,000 shares of $5 par value common stock for $50 per share, the journal entry for this issuance would include:

A. A credit to Additional Paid-in Capital for $1,350,000

B. A debit to Additional Paid-in Capital for $150,000

C. A credit to Common Stock for $1,500,000

D. A debit to Cash for $150,000

- Rachel's Recordings reported net income of $230,000. Beginning balances in Accounts Receivable and Accounts Payable were $15,000 and $23,000 respectively. Ending balances in these accounts were $9,500 and $29,000, respectively. Assuming that all relevant information has been presented, Rachel's net cash flows from operating activities would be:

A. $218,500.

B. $230,000.

C. $241,500.

D. $235,500.

Thank you so much!

Answer 1

1) Vertical analysis is that analysis in which we analysis each income statement item as a percentage of sales and each balance sheet item as as percentage of total assets and total liabilities and stockholder's equity

So answer is a) Comparing income statement items as a percentage of sales.

2) Journal entry

Date	account and explanation	debit	credit
	Cash (30000*50)	1500000
	Common Stock (30000*5)		150000
	Paid in capital in excess of par value-Common Stock		1350000

so answer is a) A credit to Additional Paid-in Capital for $1,350,000

3) Cash flow from operating activities

Net income	230000
Decrease account receivable (15000-9500)	5500
Increase account payable (29000-23000)	6000
Net cash flow from operating activities	241500

So answer is c) $241500