Question

1. Vertical Analysis of Comparative Financial Statements

   Amounts from the comparative income statement and balance sheet of Miller Electronics Corporation for the last two years are as follows:

   Miller Electronics Corporation Comparative Income Statement For Years Ended December 31, 20-2 and 20-1
   	20-2		20-1
   Net Sales (all on account)		$662,120		$427,020
   Cost of goods sold		395,040		263,840
   Gross profit		$267,080		$163,180
   Administrative expenses		$63,920		$43,090
   Selling expenses		66,123		44,353
   Total operating expenses		$130,043		$87,443
   Operating income		$137,037		$75,737
   Interest expense		1,268		1,189
   Income before income taxes		$135,769		$74,548
   Income tax expense		30,784		14,197
   Net income		$104,985		$60,351

   Miller Electronics Corporation Comparative Balance Sheet December 31, 20-2 and 20-1
   	20-2		20-1
   Assets
   Current assets:
   Cash		$43,563		$22,110
   Receivables (net)		72,910		47,180
   Merchandise inventory		92,468		50,494
   Supplies and prepayments		3,713		1,170
   Total current assets		$212,654		$120,954
   Property, plant, and equipment:
   Office equipment (net)		$11,626		$8,020
   Factory equipment (net)		105,338		70,860
   Total property, plant, and equipment		$116,964		$78,880
   Total assets		$329,618		$199,834
   Liabilities
   Current liabilities
   Notes payable		$9,970		$6,070
   Accounts payable		42,680		29,884
   Accrued and withheld payroll taxes		6,183		5,353
   Total current liabilities		$58,833		$41,307
   Stockholders' Equity
   Common stock ($10 par)		$100,000		$84,000
   Retained earnings		170,785		74,527
   Total stockholders' equity		$270,785		$158,527
   Total liabilities and stockholders' equity		$329,618		$199,834

   Required:

   Prepare a vertical analysis of the income statement and balance sheet. Show each item on the income statement as a percentage of the net sales for each year. On the balance sheet, show each asset item as a percentage of the total assets and each liability and equity item as a percentage of the total liabilities and stockholders' equity. Round percentages to one decimal place. Do not enter the percent sign. For example, 60% would be entered as 60.

   Miller Electronics Corporation
   Comparative Income Statement
   For Years Ended December 31, 20-2 and 20-1
   	20-2 Amount	20-2 Percent	20-1 Amount	20-1 Percent
   Net sales (all on account)	$662,120		$427,020
   Cost of goods sold	395,040		263,840
   Gross profit	$267,080		$163,180
   Administrative expenses	$63,920		$43,090
   Selling expenses	66,123		44,353
   Total operating expenses	$130,043		$87,443
   Operating income	$137,037		$75,737
   Interest expense	1,268		1,189
   Income before income taxes	$135,769		$74,548
   Income tax expense	30,784		14,197
   Net income	$104,985		$60,351

   Miller Electronics Corporation
   Comparative Balance Sheet
   December 31, 20-2 and 20-1
   Assets
   	20-2 Amount	20-2 Percent	20-1 Amount	20-1 Percent
   Current assets:
   Cash	$43,563		$22,110
   Receivables (net)	72,910		47,180
   Merchandise inventory	92,468		50,494
   Supplies and prepayments	3,713		1,170
   Total current assets	$212,654		$120,954
   Property, plant, and equipment:
   Office equipment (net)	$11,626		$8,020
   Factory equipment (net)	105,338		70,860
   Total prop., plant, and equip.	$116,964		$78,880
   Total assets	$329,618		$199,834
   Liabilities
   Current liabilities:
   Notes payable	$9,970		$6,070
   Accounts payable	42,680		29,884
   Accrued and withheld payroll taxes	6,183		5,353
   Total current liabilities	$58,833		$41,307
   Stockholders' Equity
   Common stock ($10 par)	$100,000		$84,000
   Retained earnings	170,785		74,527
   Total stockholders' equity	$270,785		$158,527
   Total liab. and stockholders' equity	$329,618		$199,834

Answer 1

1

Miller Electronics Corporation
Comparative Income Statement
For Years Ended December 31, 20-2 and 20-1
	20-2	20-2 Percent	20-1	20-1 Percent
Net Sales (all on account)	662120	100	427020	100
Cost of goods sold	395040	59.66	263840	61.79
Gross profit	267080	40.34	163180	38.21
Administrative expenses	63920	9.65	43090	10.09
Selling expenses	66123	9.99	44353	10.39
Total operating expenses	130043	19.64	87443	20.48
Operating income	137037	20.70	75737	17.74
Interest expense	1268	0.19	1189	0.28
Income before income taxes	135769	20.51	74548	17.46
Income tax expense	30784	4.65	14197	3.32
Net income	104985	15.86	60351	14.13

2

Miller Electronics Corporation
Comparative Balance Sheet
December 31, 20-2 and 20-1
	20-2	20-2 Percent	20-1	20-1 Percent
Assets
Current assets:
Cash	43563	13.22	22110	11.06
Receivables (net)	72910	22.12	47180	23.61
Merchandise inventory	92468	28.05	50494	25.27
Supplies and prepayments	3713	1.13	1170	0.59
Total current assets	212654	64.52	120954	60.53
Property, plant, and equipment:
Office equipment (net)	11626	3.53	8020	4.01
Factory equipment (net)	105338	31.96	70860	35.46
Total property, plant, and equipment	116964	35.48	78880	39.47
Total assets	329618	100.00	199834	100.00
Liabilities
Current liabilities
Notes payable	9970	3.02	6070	3.04
Accounts payable	42680	12.95	29884	14.95
Accrued and withheld payroll taxes	6183	1.88	5353	2.68
Total current liabilities	58833	17.85	41307	20.67
Stockholders' Equity				0.00
Common stock ($10 par)	100,000	30.34	84000	42.03
Retained earnings	170785	51.81	74527	37.29
Total stockholders' equity	270,785	82.15	158,527	79.33
Total liabilities and stockholders' equity	329,618	100.00	199,834	100.00

Note: As in the question it is specifically mentioned that"Do not enter the percent sign. For example, 60% would be entered as 60" so I have not answer the figure in percentage term but only in dollar term . you can also prasent in percentage term see the following picture and Provided the formulla also

Working notes for the above answer is as under

Fomulla for Comparative income statement

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Comparative balance sheet in % term

Formulla