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21. Taylor Company reported the following information for the current year: Account Current year Percentage Prior year Net sales revenue $367,200 100% $300,000 COGS $220,320

21. Taylor Company reported the following information for the current year:

Account

Current year

Percentage

Prior year

Net sales revenue

$367,200

100%

$300,000

COGS

$220,320

?

$240,000

Gross Profit

$146,880

40.00%

$60,000

Selling/General Exp.

$69,768

19.00%

$12,000

Net income before tax

$77,112

?

$48,000

Income Tax

$7,344

2.00%

$3,000

Net Income

$69,768

?

$45,000

What would a vertical analysis report with respect to current year income tax expense?

A) A decrease of $24,768

B) A decrease of 144.80% from prior to current year

C) Income tax expense is 2.00% of net sales revenue

D) A decrease of $4,344

22. Comparing the horizontal analysis of McDonald's financial statements to the horizontal analysis of Burger King's financial statements in percentages of increase or decrease from 2010 to 2011 would be

A) vertical analysis.

B) benchmarking.

C) ratio analysis.

D) horizontal analysis.

23. Presented are the income statements of Ritman and Taylor Publications companies for the current year:

Ritman

Taylor

Net sales revenue

$487,000

100.00%

$500,000

100.00%

COGS

400,000

82.14%

395,000

79.00%

Gross Profit

87,000

17.86%

105,000

21.00%

Selling/Gen Expenses

30,000

6.16%

50,000

10.00%

Income from operations

57,000

11.70%

55,000

11.00%

Income tax expense

17,100

3.51%

16,500

3.30%

Net Income

$39,900

8.19%

$38,500

7.70%

Which company has the better relationship percentage-wise between selling and general expenses compared to net sales revenue?

A) Impossible to determine

B) Both have the same relationship

C) Ritman

D) Taylor

24. Which of the following is considered a strong current ratio?

A) 0.5

B) 1.0

C) -1.0

D) 2.0

Proposal X

Proposal Y

Investment

$ 850,000

$ 468,000

Useful life

8 years

8 years

Estimated annual net

cash inflows for 8 years

$ 125,000

$ 78,000

Residual value

$ 40,000

$ -

Depreciation method

Straight-line

Straight-line

Required rate of return

14%

10%

13. How long is the payback period for Proposal X?

A) 10.90 years

B) 6.00 years

C) 6.80 years

D) 21.25 years

14. What is the accounting rate of return for Proposal X?

A) 2.88 %

B) 14.71 %

C) 26.62 %

D) 2.79%

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