James Birch is the principal owner of ABC Company, a medium-sized company that sells office equipment to
Question:
James Birch is the principal owner of ABC Company, a medium-sized company that sells office equipment to an office supply company that operates in the Midwest. Recently, James received an anonymous tip that the financial statements of ABC for the most recent year, 20X2, were fraudulent. James has contacted you, a forensic accountant, to perform an analysis of the company as a starting point of an investigation. You have organized the information into the following table:
ABC Company | |||||||
---|---|---|---|---|---|---|---|
Vertical Analysis | Horizontal Analysis | ||||||
Balance Sheet | Year 20X1 | Year 20X2 | Change | ||||
Elements | Amount | % | Amount | % | Amount | % | |
Cash | $ 1,035,263 | $ 643,258 | |||||
Accounts | 5,738,932 | 8,532,970 | |||||
Inventory | 9,250,164 | 8,432,581 | |||||
Plant and equipment (net) | 12,593,298 | 12,789,315 | |||||
Total assets | $28,617,657 | $30,398,124 | |||||
Accounts | $ 739,582 | $ 738,431 | |||||
Non-current debt | 1,075,213 | 985,234 | |||||
Common stock | 400,000 | 400,000 | |||||
Paid-in capital | 953,621 | 953,621 | |||||
Retained | 25,449,241 | 27,320,838 | |||||
Total liabilities and equity | $28,617,657 | $30,398,124 | |||||
Net sales | $16,358,172 | $20,951,359 | |||||
Cost of goods sold | 9,814,903 | 9,179,156 | |||||
Gross profit | 6,543,269 | 11,772,203 | |||||
Selling | 1,938,251 | 2,539,487 | |||||
Administrative expenses | 2,583,421 | 3,062,512 | |||||
Net income | 2,021,597 | 6,170,204 |
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Required
- Complete the table.
- What areas, if any, appear to deserve closer examination? Why?
- For any areas identified in name two procedures that you could perform to determine whether the area is misstated.
Quantitative Analysis for Management
ISBN: 978-0133507331
12th edition
Authors: Barry Render, Ralph M. Stair, Michael E. Hanna, Trevor S. Ha