Question

In: Accounting

Here are comparative statement data for Wildhorse Company and Sandhill Company, two competitors. All balance sheet...

Here are comparative statement data for Wildhorse Company and Sandhill Company, two competitors. All balance sheet data are as of December 31, 2022, and December 31, 2021.

Wildhorse Company

Sandhill Company

2022

2021

2022

2021

Net sales

$1,892,000 $580,000

Cost of goods sold

1,075,000 298,000

Operating expenses

260,000 87,000

Interest expense

8,200 2,200

Income tax expense

65,300 29,000

Current assets

498,742 $477,987 127,504 $ 121,585

Plant assets (net)

806,004 765,000 213,784 192,492

Current liabilities

101,477 115,997 54,082 46,330

Long-term liabilities

174,405 137,700 45,319 38,250

Common stock, $10 par

765,000 765,000 183,600 183,600

Retained earnings

263,864 224,290 58,287 45,897


(a)

Prepare a vertical analysis of the 2022 income statement data for Wildhorse Company and Sandhill Company. (Round all ratios to 1 decimal place, e.g. 2.5%.)

Condensed Income Statement
For the Year Ended December 31, 2022

Wildhorse Company

Sandhill Company

Dollars

Percent

Dollars

Percent

select an income statement item                                                          Total ExpensesTotal Operating ExpensesDividendsCost of Goods SoldSales RevenuesIncome From OperationsNet SalesIncome Tax ExpenseOther Revenues and GainsOther Expenses and LossesExpensesOperating ExpensesGross ProfitInterest ExpenseRetained Earnings, December 31Retained Earnings, January 1Income Before Income TaxesNet Income / (Loss)Total Revenues

$1,892,000

enter percentages

%

$580,000

enter percentages

%

select an income statement item                                                          Total ExpensesTotal Operating ExpensesExpensesTotal RevenuesGross ProfitCost of Goods SoldNet Income / (Loss)Income Before Income TaxesSales RevenuesNet SalesInterest ExpenseOther Expenses and LossesIncome From OperationsOther Revenues and GainsRetained Earnings, December 31Operating ExpensesDividendsIncome Tax ExpenseRetained Earnings, January 1

1,075,000

enter percentages

%

298,000

enter percentages

%

select a summarizing line for the first part                                                          Cost of Goods SoldDividendsOther Revenues and GainsNet SalesTotal ExpensesSales RevenuesGross ProfitIncome Tax ExpenseRetained Earnings, December 31Operating ExpensesIncome Before Income TaxesIncome From OperationsExpensesNet Income / (Loss)Other Expenses and LossesTotal RevenuesInterest ExpenseRetained Earnings, January 1Total Operating Expenses

817,000

enter percentages

%

282,000

enter percentages

%

select an income statement item                                                          Net SalesIncome From OperationsCost of Goods SoldOther Expenses and LossesDividendsOther Revenues and GainsIncome Tax ExpenseExpensesTotal ExpensesNet Income / (Loss)Interest ExpenseTotal Operating ExpensesIncome Before Income TaxesRetained Earnings, January 1Retained Earnings, December 31Total RevenuesGross ProfitSales RevenuesOperating Expenses

260,000

enter percentages

%

87,000

enter percentages

%

select a summarizing line for the second part                                                          Income Tax ExpenseCost of Goods SoldNet Income / (Loss)Income From OperationsNet SalesTotal Operating ExpensesGross ProfitIncome Before Income TaxesDividendsOther Expenses and LossesTotal RevenuesInterest ExpenseTotal ExpensesExpensesOperating ExpensesSales RevenuesOther Revenues and GainsRetained Earnings, January 1Retained Earnings, December 31

557,000

enter percentages

%

195,000

enter percentages

%

select an opening section name                                                          Operating ExpensesSales RevenuesTotal ExpensesGross ProfitIncome Before Income TaxesCost of Goods SoldExpensesRetained Earnings, December 31Net Income / (Loss)Income From OperationsRetained Earnings, January 1Other Expenses and LossesIncome Tax ExpenseTotal Operating ExpensesNet SalesTotal RevenuesDividendsOther Revenues and GainsInterest Expense

select an income statement item                                                          Interest ExpenseNet SalesGross ProfitTotal Operating ExpensesRetained Earnings, January 1Other Revenues and GainsExpensesIncome Tax ExpenseIncome From OperationsRetained Earnings, December 31Total ExpensesSales RevenuesOperating ExpensesNet Income / (Loss)Total RevenuesCost of Goods SoldIncome Before Income TaxesOther Expenses and LossesDividends

8,200

enter percentages

%

2,200

enter percentages

%

select a summarizing line for the third part                                                          Other Revenues and GainsGross ProfitExpensesIncome Tax ExpenseRetained Earnings, January 1Total RevenuesRetained Earnings, December 31Total Operating ExpensesIncome Before Income TaxesIncome From OperationsDividendsSales RevenuesNet Income / (Loss)Net SalesInterest ExpenseCost of Goods SoldOther Expenses and LossesTotal ExpensesOperating Expenses

548,800

enter percentages

%

192,800

enter percentages

%

select an income statement item                                                          Interest ExpenseExpensesTotal RevenuesGross ProfitTotal ExpensesNet SalesCost of Goods SoldRetained Earnings, January 1Total Operating ExpensesIncome From OperationsRetained Earnings, December 31Net Income / (Loss)DividendsOperating ExpensesSales RevenuesIncome Before Income TaxesOther Revenues and GainsIncome Tax ExpenseOther Expenses and Losses

65,300

enter percentages

%

29,000

enter percentages

%

select a closing name for this statement                                                          ExpensesIncome From OperationsNet SalesOperating ExpensesNet Income / (Loss)Total ExpensesIncome Tax ExpenseCost of Goods SoldOther Expenses and LossesRetained Earnings, January 1Interest ExpenseTotal RevenuesIncome Before Income TaxesOther Revenues and GainsTotal Operating ExpensesSales RevenuesDividendsRetained Earnings, December 31Gross Profit

$483,500

enter percentages

%

$163,800

enter percentages

%


(b1)

Compute the 2022 return on assets and the return on common stockholders’ equity for both companies. (Round all ratios to 1 decimal place, e.g. 2.5%.)

Wildhorse Company

Sandhill Company

Return on assets

enter percentages

%

enter percentages

%

Return on common stockholders’ equity

enter percentages

%

enter percentages

%

Solutions

Expert Solution

Comparative Income Statement
Years ended Dec 31
Vertical Analysis for 2022
Wildhorse Company Percentage Sandhill Company Percentage
Net Sales $1,892,000 100.0% $580,000 100.0%
Less:Cost of goods sold $1,075,000 56.8% $298,000 51.4%
Gross Profit $817,000 43.2% $282,000 48.6%
Less:Operating expenses $260,000 13.7% $87,000 15.0%
Income from Operations $557,000 29.4% $195,000 33.6%
Other Revenues & (Expenses)
Less:Interest expenses $8,200 0.4% $2,200 0.4%
Income before taxes $548,800 29.0% $192,800 33.2%
Income tax expenses $65,300 3.5% $29,000 5.0%
Net Income $483,500 25.6% $163,800 28.2%
Return on Assets =Net Income / Average Total Assets
Particulars Wildhorse Company Sandhill Company
2022 2021 2022 2021
Current Assets $498,742 $477,987 $127,504 $121,585
Plant Assets $806,004 $765,000 $213,784 $192,492
Total Assets $1,304,746 $1,242,987 $341,288 $314,077
Average Total Assets(a) $1,273,867 $327,683
Net Income(b) $483,500 $163,800
Return on Assets(b/a) 38.0% 50.0%
Return on Common Stockholders Equity =Net Income / Average Common Stockholders Equity
Particulars Wildhorse Company Sandhill Company
2022 2021 2022 2021
Common Stock $765,000 $765,000 $183,600 $183,600
Retained Earnings $263,864 $224,920 $58,287 $45,897
Total Assets $1,028,864 $989,920 $241,887 $229,497
Average Total Assets(a) $1,009,392 $235,692
Net Income(b) $483,500 $163,800
Return on Assets(b/a) 47.9% 69.5%

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