Analyzing Financial Statements Using Horizontal Analyses
The comparative financial statements prepared at December 31, 2010, for Pinnacle Plus showed the following summarized data:
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| Increase (Decrease) 2010 over 2009 | |
2010 | 2009 | Amount | Percentage | |
Income Statement |
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Sales Revenue⋆ | $110,000 | $ 99,000 |
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Cost of Goods Sold | 52,000 | 48,000 |
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Gross Profit | 58,000 | 51,000 |
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Operating Expenses | 36,000 | 33,000 |
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Interest Expense | 4,000 | 4,000 |
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Income before Income Tax Expense | 18,000 | 14,000 |
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Income Tax Expense (30%) | 5,400 | 4,200 |
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Net Income | $ 12,600 | $ 9,800 |
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Balance Sheet |
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Cash | $ 49,500 | $ 1 8,000 |
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Accounts Receivable, Net | 37,000 | 32,000 |
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Inventory | 25,000 | 38,000 |
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Property and Equipment, Net | 95,000 | 105,000 |
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Total Assets | $206,500 | $193,000 |
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Accounts Payable | $ 42,000 | $ 35,000 |
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Income Tax Payable | 1,000 | 500 |
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Note Payable, Long-Term | 40,000 | 40,000 |
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Total Liabilities | 83,000 | 75,500 |
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Common Stock (par $10) | 90,000 | 90,000 |
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Retained Earnings1" | 33,500 | 27,500 |
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Total Liabilities and Stockholders’ Equity | $206,500 | $193,000 |
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* One-half of all sales are on credit.
† During 2010, cash dividends amounting to $6,600 were declared and paid.
Required:
1.Complete the two final columns shown beside each item in Pinnacle Plus’s comparative financial statements. Round the percentages to one decimal place.
2.Does anything significant jump out at you from the horizontal analyses?
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