Question

Using the following information from an annual report, prepare a Common size (vertical analysis) of the consolidated statement of earnings for the fiscal year ended June 30, 2014. (Round percentage answers to one decimal place.)   2 points (In millions) Net sales $18,862 Cost of sales     10,321 Gross margin $ 8,541 Selling expenses General and Administrative expenses $ 3,043 978 Total operating expenses $ 4,021 Income from operations $   4,520 Interest expense (80)           Earnings before income taxes $ 4,440 Income taxes       (1,161) Net earnings $     3,279

Indicate on the blanks below the letter of the type of activity each of the following transactions represents. (O = operating activity, I = investing activity, F = financing activity, N = noncash transaction) (8 points) _____ 1. A corporation sold (issued) 8,000 shares of it’s own common stock for cash. _____ 2. Sold $200,000 of plant assets for carrying value.(ie no gain or loss) _____ 3. Paid $120,000 dividend to our shareholders. _____ 4. Received $1,500 in interest income. _____ 5. Exchanged 6,000 shares of stock for 15-year bonds. _____ 6. Paid $121,000 to the IRS for income taxes. _____ 7. Purchase of another company’s stock _____ 8. Paying employees

Answer 1

Answer-

VERTICAL ANALYSIS
FOR THE YEAR ENDED JUNE 30,2014
$ in million
PARTICULARS	AMOUNT	PERCENT
	$	$
Sales	18862	100.0
Less- Cost of sales	10321	54.7
Gross profit	8541	45.3
Less-Selling expenses	3043	16.1
General & Administrative expenses	978	5.2
Total operaing expenses	4021	21.3
Income before interest & income taxes	4520	24.0
Less- Interest expense	80	0.4
Income before income taxes	4440	23.5
Less- Income tax expense	1161	6.2
Net income	3279	17.4

Answer-

F	1	A corporation sold (issued) 8,000 shares of it’s own common stock for cash.
I	2	Sold $200,000 of plant assets for carrying value.(ie no gain or loss)
F	3	Paid $120,000 dividend to our shareholders.
O	4	Received $1,500 in interest income.
N	5	Exchanged 6,000 shares of stock for 15-year bonds.
O	6	Paid $121,000 to the IRS for income taxes.
I	7	Purchase of another company’s stock
O	8	Paying employees