Problem 14-1A (Part Level Submission) Farris Company Ratzlaff Company 2017 2016
ID: 415212 • Letter: P
Question
Problem 14-1A (Part Level Submission)
Farris Company
Ratzlaff Company
2017
2016
2017
2016
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(a)
Farris Company
Ratzlaff Company
Dollars
Percent
Dollars
Percent
Problem 14-1A (Part Level Submission)
Comparative statement data for Farris Company and Ratzlaff Company, two competitors, appear below. All balance sheet data are as of December 31, 2017, and December 31, 2016.Farris Company
Ratzlaff Company
2017
2016
2017
2016
Net sales $1,555,000 $339,500 Cost of goods sold 1,000,000 241,400 Operating expenses 302,900 79,200 Interest expense 8,800 3,000 Income tax expense 53,700 6,700 Current assets 325,000 $314,200 82,600 $79,200 Plant assets (net) 520,200 501,800 140,400 124,200 Current liabilities 64,800 74,400 37,000 30,200 Long-term liabilities 107,000 90,400 28,000 25,400 Common stock, $10 par 503,000 503,000 116,000 116,000 Retained earnings 170,400 148,200 42,000 31,800Warning
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Prepare a vertical analysis of the 2017 income statement data for Farris Company and Ratzlaff Company in columnar form. (Round percentages to 1 decimal place, e.g. 12.1%.)Condensed Income Statement
December 31, 2017For the Quarter Ended December 31, 2017For the Year Ended December 31, 2017
Farris Company
Ratzlaff Company
Dollars
Percent
Dollars
Percent
Cost of Goods SoldDividendsExpensesGross ProfitIncome Before Income TaxesIncome From OperationsIncome Tax ExpenseInterest ExpenseNet Income / (Loss)Net SalesOperating ExpensesOther Expenses and LossesRevenuesTotal ExpensesTotal Revenues
$ % $ %Cost of Goods SoldDividendsExpensesGross ProfitIncome Before Income TaxesIncome From OperationsIncome Tax ExpenseInterest ExpenseNet Income / (Loss)Net SalesOperating ExpensesOther Expenses and LossesRevenuesTotal ExpensesTotal Revenues
% %Cost of Goods SoldDividendsExpensesGross ProfitIncome Before Income TaxesIncome From OperationsIncome Tax ExpenseInterest ExpenseNet Income / (Loss)Net SalesOperating ExpensesOther Expenses and LossesRevenuesTotal ExpensesTotal Revenues
% %Cost of Goods SoldDividendsExpensesGross ProfitIncome Before Income TaxesIncome From OperationsIncome Tax ExpenseInterest ExpenseNet Income / (Loss)Net SalesOperating ExpensesOther Expenses and LossesRevenuesTotal ExpensesTotal Revenues
% %Cost of Goods SoldDividendsExpensesGross ProfitIncome Before Income TaxesIncome From OperationsIncome Tax ExpenseInterest ExpenseNet Income / (Loss)Net SalesOperating ExpensesOther Expenses and LossesRevenuesTotal ExpensesTotal Revenues
% %Cost of Goods SoldDividendsExpensesGross ProfitIncome Before Income TaxesIncome From OperationsIncome Tax ExpenseInterest ExpenseNet Income / (Loss)Net SalesOperating ExpensesOther Expenses and LossesRevenuesTotal ExpensesTotal Revenues
Cost of Goods SoldDividendsExpensesGross ProfitIncome Before Income TaxesIncome From OperationsIncome Tax ExpenseInterest ExpenseNet Income / (Loss)Net SalesOperating ExpensesOther Expenses and LossesRevenuesTotal ExpensesTotal Revenues
% %Cost of Goods SoldDividendsExpensesGross ProfitIncome Before Income TaxesIncome From OperationsIncome Tax ExpenseInterest ExpenseNet Income / (Loss)Net SalesOperating ExpensesOther Expenses and LossesRevenuesTotal ExpensesTotal Revenues
% %Cost of Goods SoldDividendsExpensesGross ProfitIncome Before Income TaxesIncome From OperationsIncome Tax ExpenseInterest ExpenseNet Income / (Loss)Net SalesOperating ExpensesOther Expenses and LossesRevenuesTotal ExpensesTotal Revenues
% %Cost of Goods SoldDividendsExpensesGross ProfitIncome Before Income TaxesIncome From OperationsIncome Tax ExpenseInterest ExpenseNet Income / (Loss)Net SalesOperating ExpensesOther Expenses and LossesRevenuesTotal ExpensesTotal Revenues
$ % $ %Explanation / Answer
Farris Company
Net Sales = $1555000
Net Sales% =100%
Cost of goods sold = $1000000
Cost of goods sold% = 1000000/1555000 * 100 = 64.3%
Gross Profit = 1555000 - 1000000 = $555000
Gross Profit% = 555000/1555000 = 35.7%
Operating expense = $302900
Operating expense% = 302900/1555000 = 19.5%
Income from operation = 555000 - 302900 = $ 252100
Income from operation%= 252100/1555000 = 16.2%
Interest expense = $8800
Interest expense% = 8800/1555000 = 0.6%
Income before income taxes = $252100 - 8800 = $243300
Income before income taxes%= 243300/1555000 = 15.6%
Income tax expense = $53700
Income tax expense%= 53700/1555000 = 3.5%
Net income = $243300 - 53700 = $189600
Net income%= 189600/1555000 = 12.2%
Ratzlaff Company
Net Sales = $339500
Net Sales% =100%
Cost of goods sold = $241400
Cost of goods sold% = 241400/339500 = 71.1%
Gross Profit = 339500 - 241400 = $98100
Gross Profit% = 98100/339500 = 28.9%
Operating expense = $79200
Operating expense% = 79200/339500 = 23.3%
Income from operation = 98100 - 79200 = $18900
Income from operation%= 18900/339500 = 5.5%
Interest expense = $3000
Interest expense% = 3000/339500 = 0.9%
Income before income taxes = $18900 - 3000 = $15900
Income before income taxes%= 15900/339500 = 4.7%
Income tax expense = $6700
Income tax expense%= 6700/339500 = 2%
Net income = $15900-6700 = $9200
Net income%= 9200/339500 = 2.7%