Question

Prepare a Vertical Analysis of Income Statement. (Show your % out to 2 Decimals, example =9.55%

Answer the Following Questions Below the Analysis Report

.i) How much of Every Dollar from a Customer does our Business Keep?

ii) What is the Largest Single Expense for our Biz and How much does it Cost per Dollar?

iii) What is the Largest Single Operating Expense and How much does it Cost per Dollar?

1) Jan-1 The JW-Corp Received $120,000 from Investors in Exchange for 6,000 shares of Common Stock.

2) Jan-2 JW-Corp Borrowed $150,000 from SCHWAB BANK and signed a Note Due in 24 months.

3) Jan-3 JW Corp purchased Office Equipment worth $120,000 (5 year life), with a $40,000 Down payment of Cash and the remainder Due on account to Target-Corp within 9 Months.

4) Jan-4 JW Corp purchased an Office Building for $600,000 (25 year life), by making a Down payment of $60,000 and then signed a Note for the remainder Due in 18 Months to CHASE Bank.

5) Jan-5 JW Corp paid $15,000 with a check for Office Rent for the next 3 months.

6) Jan-10 JW Corp paid $4,000 with a check for Business Insurance for this month.

7) Jan-11 JW Corp provided CPA Services to the Gavilan Corp worth $175,000 and Collected $85,000 Cash and Billed them the remainder on Account.

8) Jan-15 JW-Corp received This Month’s Utility Bill from PGE for $3,000 to be paid Later.

9) Jan-16 JW-Corp received This Month’s Telephone Bill from Skype for $200 to be paid Later.

10) Jan-17 JW-Corp received a $10,000 check from Gavilan Corp on Account.11) Jan-20 JW-Corp received a BILL for $15,000 for Legal Fees used this month to be Paid Later.

12) Jan-23 JW-Corp paid $11,000 with Checks for this Months Salaries expenses.

13) Jan-24 JW-Corp Received a $13,000 check from Gavilan Corp on Account.

14) Jan-25 JW-Corp received a $27,000 check from Garlic-Corp for Services to be Provided Later

.15) Jan-26 JW-Corp Paid Target $33,000 with a Check towards the Equipment from Transaction #3.

16) Jan-27 JW Corp Wrote a Check to Skype for the Full Amount Due on account for the Telephone Bill from #9.

17) Jan-28 JW Corp Paid $4.20 Cents per Share to the Owners of the Business with Checks.

18) Jan-29 JW-Corp paid $9,000 with a Check on the Note Payable from Transaction #2, $2,800 was for Interest Expense, and the remainder reduced the Note Payable.

19) Jan-31 JW-Corp recorded one Month of RENT Expense from the Prepaid Account.

20) Jan-31 JW-Corp recorded one Month of Depreciation Expense on The Office Equipment Using the Straight Line Depreciation Method.

21) Jan-31 The JW Corp recorded one Month of Depreciation Expense on the Office Building using the Straight Line Depreciation Method.

22) Jan-31 the JW-Corp Recorded the Income Tax Payable for the Month, which is 34.00% of Net Income.

Answer 1

The answer is attached as an image. The p&l account is prepared for the month of January on an accrual basis.

The analysis is as follows-

i) every dollar that the business keeps is net income after tax/ revenue = (86000-29240)/ 175000 = 32.43%

ii) largest single expense is depreciation which amounts to 24000 and it costs 24000/175000= 13.71%

iii) the largest operating expense is the depreciation and it costs 13.71% per dollar as calculated above.