The Mathematics of Money

Copyright © 2008, The McGraw-Hill Companies, Inc.

Exercises 12.1 497

2007 Income Statement

Sales $265,951


Cost of goods sold $144,043

Gross profi t $121,908


Expenses $72,500

Net income $49,408

D. Grab Bag

18. If you are looking at trends from one year to the next, would you want to use vertical or horizontal analysis?


19. If you want to look at each item on the income statement as a percent of the company’s total sales, would you want to
    use vertical or horizontal analysis?

Exercises 20 to 35 are based on the fi nancial statement shown below:

2007 2006

I. Revenues

Gross sales $425,000 $405,000

Less returns $18,200 $18,300

Less sales discounts $0 $2,500

Net sales

II. Cost of goods sold

Beginning inventory $98,500 $118,000

Net purchases $176,800 $137,500

Ending inventory $127,300 $98,500

Cost of goods sold

III. Gross Profi t

IV. Operating Expenses

Wages, salaries, and benefi ts $103,000 $98,500

Rent and utilities $68,425 $66,500

Depreciation $8,400 $8,700

Other $15,000 $12,000

To tal operating expenses

V. EBIT

VI. Interest and taxes

Provision for taxes $10,000 $7,500

Interest $0 $0

To tal interest and taxes $10,000 $7,500

VII. Net income

20. Calculate the 2006 net sales.


21. Calculate the 2007 net sales.


22. Calculate the 2006 cost of goods sold.