The comparative financial statements prepared on December 31 for Pinnacle Plus showed the...
Question:
The comparative financial statements prepared on December 31 for Pinnacle Plus showed the following summarized data:
| Current Year | Previous Year | |
|---|---|---|
| Income Statement: | ||
| Sales Revenue | $125,000 | $111,000 |
| Cost of Goods Sold | $58,000 | $54,000 |
| Gross Profit | $67,000 | $57,000 |
| Operating Expenses | $39,000 | $35,400 |
| Interest Expense | $4,300 | $4,300 |
| Income before Income Tax Expense | $23,700 | $17,300 |
| Income Tax Expense (30%) | $7,110 | $5,190 |
| Net Income | $16,590 | $12,110 |
| Balance Sheet: | ||
| Cash | $73,415 | $35,000 |
| Accounts Receivable, Net | $20,000 | $15,000 |
| Inventory | $28,000 | $41,000 |
| Property and Equipment, Net | $98,000 | $108,000 |
| Total Assets | $219,415 | $199,000 |
| Accounts Payable | $45,000 | $34,700 |
| Income Tax Payable | $1,075 | $650 |
| Note Payable (long-term) | $43,000 | $43,000 |
| Total Liabilities | $89,075 | $78,350 |
| Common Stock (par $10) | $91,800 | $91,800 |
| Retained Earnings | $38,540 | $28,850 |
| Total Liabilities and Stockholders' Equity | $219,415 | $199,000 |
During the current year, cash dividends amounting to $6,900 were declared and paid.
Required:
1a. Compute the gross profit percentage in the current and previous years.
1b. Are the current year results better, or worse than those for the previous year?
2a. Compute the net profit margin for the current and previous years.
2b. Are the current year results better, or worse than those for the previous year?
Comparative Financial Statement:
It is a set of financial statements and contains information for multiple reporting periods. It compares a company's financial performance over multiple periods to help spot the trends.
Answer and Explanation: 1
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View this answer1a. Computation of gross profit ratio for the current year:
| Particulars | Amount |
| A. Gross profit | $67,000 |
| B. Sales | $ 125,000 |
| Gross profit ratio ((A/B)... |
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