Problem 141A Comparative statement data for Farris Company a

Problem 14-1A Comparative statement data for Farris Company and Ratzlaff Company, two competitors, appear below. All balance sheet data are as of December 31, 2017, and December 31, 2016. Farris Company Ratzlaff Company 2017 $1,549,035 1,080,490 2016 2017 2016 Net sales Cost of goods sold Operating expenses Interest expense Income tax expense Current assets Plant assets (net) Current liabilities Long-term liabilities Common stock, $10 par Retained earnings 339,038 241,000 79,000 2,252 6,650 302,275 8,980 54,500 25,975 $312,410 83,336 $79,467 521,310 500,000 139,728 125,812 65,32575,815 35,348 30,281 108,500 90,000 29,620 25,000 500,000 500,000 120,000 120,000 173,460 146,595 38,096 29,998 Prepare a vertical analysis of the 2017 income statement data for Farris Company and Ratzlaff Company in columnar form. (Round percentages to 1 decimal place, e.g. 12.1%.) Condensed Income Statement Farris Company Ratzlaff Company Dollars Percent Dollars Percent

Solution

Condensed Income Statement For the Year 2017 Farris Company Ratzlaff Company Dollars Percent Dollars Percent Net Sales 1549035 100% 3,39,038 100% Less: Cost of Goods Sold 1080490 69.8% 2,41,000 71.1% Gross Profit 468545 30.2% 98038 28.9% Less: Operating Expense 302275 19.5% 79,000 23.3% Net Income Before Taxes & Interest 166270 10.7% 19038 5.6% Less: Interest Expense 8980 0.6% 2,252 0.7% Net Income Before Taxes 157290 10.2% 16786 5.0% Less: Income Taxes 54500 3.5% 6,650 2.0% Net Income 102790 6.6% 10136 3.0% Farris Co Ratzlaff Co Average Assets: Farris Co Ratzlaff Co Return on Assets 2016 812410 205279 (Current Assets+Plan Assets) (Net Income/Average Assets) 2017 847285 223064 (Current Assets+Plan Assets) Net Income 102790 10136 Average Assets: 829848 214172 Average Assets: 829848 214172 (2016+2017)/2 Return on Assets 12.4% 4.7% Farris Co Ratzlaff Co Average Common Stock Equity: Farris Co Ratzlaff Co Return on Common stockholders E 2016 646595 149998 (Common Stock+Retained Earnings) (Net Income/Average Stockeuity) 2017 673460 158096 (Common Stock+Retained Earnings) Net Income 102790 10136 Average Common Stock Equity: 660028 154047 Average Common Stock Equity: 660028 154047 (2016+2017)/2 Return on Assets 15.6% 6.6%