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E13-3 Preparing and Interpreting a Schedule for Horizontal and Vertical Analyses [LO 13-2, LO 13-3, LO 13-5) According to the producer price index database maintained

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E13-3 Preparing and Interpreting a Schedule for Horizontal and Vertical Analyses [LO 13-2, LO 13-3, LO 13-5) According to the producer price index database maintained by the Bureau of Labor Statistics, the average cost of computer equipment fell 3.8 percent between January and December 2016 Required: 1. Conduct a horizontal analysis by calculating the year-over-year changes in each line item, expressed in dollars and in percentages for the income statement of Computer Tycoon Inc. for the year ended December 31, 2016. 2-a. Conduct a vertical analysis by expressing each line as a percentage of total revenues. 2-b. Excluding income tax, Interest, and operating expenses, did Computer Tycoon earn more profit per dollar of sales in 2016 compared to 2015? Reg 1 Reg 2A Req 2B Conduct a horizontal analysis by calculating the year-over-year changes in each line item, expressed in dollars and in percentages for the income statement of Computer Tycoon Inc. for the year ended December 31, 2016. (Decreases should be indicated by a minus sign. Round percentage values to 1 decimal place.) COMPUTER TYCOON, INC. Income Statements For the Year Ended December 31 Change in 2016 2015 Dollars Percentage Sales Revenue $ 118,000 $ 147,000 $ (29,000) 20.0 % Cost of Goods Sold 69,000 78,700 (9.700) (12,3) % Gross Profit 49,000 68,300 (19,300) (283) % Selling, General, and Administrative Expenses 37,800 40,600 (2,800) (6.9) % Interest Expense 680 565 20.4% Income before Income Tax Expense 10,520 27.135 (16,615) (61.2) % Income Tax Expense 2,500 6,800 (4,300) (36.7) 3 % 8,020 $ 20,335 $ (12,315) 80.0 % 115 Net Income Reg 1 Reg 2A Reg 28 Conduct a vertical analysis by expressing each line as a percentage of total revenues. (Round percentage values to 1 decimal place.) 2015 COMPUTER TYCOON, INC Income Statements For the Year Ended December 31 2016 Sales Revenue $110.000 20.0 % Cost of Goods Sold 69,000 % Gross Profit 49,000 % Selling, General, and Administrative Expenses 37,800 Interest Expense 680 income before Income Tax Expense 10,520 % Income Tax Expense 2.500 % Net Income 8,020 % 5147.000 78,700 68,300 40.800 % 565 % * 27.135 6,800 20.335 $ % %

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