Chapter 17 Homework - Prob 171A 1 CLAPTON COMPANY Comparative Income Statement For the Years Ended and 2015 Increase(Decrease 2016 2015 Amount Percent

Chapter 17 Homework - Prob 171A 1 CLAPTON COMPANY...

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Prob. 17–1A 1. 2. Net income has declined from 2015 to 2016. Sales have increased by 12.5%; however, the cost of goods sold has increased by 24.0%, causing the gross profit to increase at a slower pace than sales. In addition, total operating expenses have increased at a faster rate than sales (25.7% increase vs. 12.5% sales increase). Increases in costs and expenses that are higher than the increase in sales have caused the net income to decline by 4.5 CLAPTON COMPANY Comparative Income Statement For the Years Ended December 31, 2016 and 2015 2016 2015 Increase (Decrease) Amount Percent Sales $6,750,000 $6,000,000 $ 750,000 12.5% Cost of goods sold 2,480,000 2,000,000 480,000 24.0% Gross profit $4,270,000 $4,000,000 $ 270,000 6.8% Selling expenses 1,260,000 1,000,000 260,000 26.0% Administrative expenses 625,000 500,000 125,000 25.0% Total operating expenses $1,885,000 $1,500,000 $ 385,000 25.7% Income from operations $2,385,000 2,500,000 $(115,000) (4.6%) Other income 110,000 100,000 10,000 10.0% Income before income tax $2,495,000 $2,600,000 $(105,000) (4.0%) Income tax expense 60,000 50,000 10,000 20.0% Net income $2,435,000 $2,550,000 $(115,000) (4.5%)
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Prob. 17–4A 1. Working Capital: $1,100,000 $440,000 = $660,000 Ratio Numerator Denominator Calculated Value 2. Current ratio $1,100,000 $440,000 2.5 3. Quick ratio $880,000 $440,000 2.0 4. Accounts receivable turnover $1,200,000 ($130,000 + $110,000) ÷ 2 10.0 5. Number of days' sales in receivables ($130,000 + $110,000)
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