Vertical Analysis Formula Vertical Analysis Formula (Income Statement) Income Statement Item Total Sales X 100 Vertical Analysis Formula (Balance Sheet) = Balance Sheet Item Total Assets (Liabilities) x 100 1024 x 461 x Horizontal Analysis Formula Horizontal Analysis (absolute) = Amount in Comparison Year - Amount in Base Year Horizontal Analysis (%) Amount in Comparison Year - Amount in Base Year X 100 Amount in Base Year 1. Perform preliminary analytical procedures on the financial statements. a. Perform horizontal (year-to-year changes) and vertical (common size financial statements) analyses using the provided trial balances. b. Calculate appropriate financial ratios. Assume the market value of the common stock is $24 million in both the current and prior years. (10 points) 2. Write a memo (labeled GA-4) highlighting what you believe are potential problem areas. In other words, are there any significant changes from year-to-year that we might need to investigate further, or does anything jump out at you? Include printouts of your calculations from 1. above as support and label them GA-4-1, GA-4-2, etc. (You're using GA-4 because other auditors have included other documents in the working paper file already - GA-1, -2, and -3.) (15 points) Oxford Manufacturing, Inc. Pre-closing Trial Balance (Audited) December 31, 2018 Credit Debit $ 1,987.28 198,116.52 3,044,958.13 16,410,902.71 $ 1,262,819.88 18,825,205.24 3,012,000.00 743,314.38 200,000.00 7,406.82 117,000.00 623,905.92 433,217.10 163,500.00 572,691.08 53,840.59 Account ID 10100 10200 10300 10400 11000 11500 12000 12300 14100 14200 14300 14400 14700 15000 15100 15200 17000 19000 19900 20000 23100 23200 23300 23350 23400 23500 23600 23700 23800 23900 24100 24200 24300 24700 27000 39003 39004 39005 40000 41000 Account Description Cash on Hand Regular Checking Account Payroll Checking Account Savings Account Accounts Receivable Allowance for Doubtful Accounts Inventory Reserve for Inventory Obsolescence Prepaid Insurance Prepaid Rent Office Supplies Notes Receivable-Current Other Current Assets Land Buildings and Land Improvements Machinery, Equipment, Office Furniture Accum. Depreciation Investments Other Noncurrent Assets Accounts Payable Sales Tax Payable Wages Payable FICA Employee Withholding Medicare Withholding Federal Payroll Taxes Payable FUTA Tax Payable State Payroll Taxes Payable SUTA Tax Payable Employer FICA Payable Employer Medicare Payable Line of Credit Current Portion Long-Term Debt Notes Payable-Current Other Current Liabilities Notes Payable-Noncurrent Common Stock Paid-in Capital Retained Earnings Sales Sales Returns 4,633,118.09 0.00 29,470.32 1,318.69 583.99 6,033.01 2,815.47 1,318.69 583.99 10,000,000.00 8,105,000.00 7,423,000.00 2,219,620.65 246,172,918.44 4,497,583.20 4,497,583.20 1,100,281.48 0.00 204,302.81 41000 42000 45000 46000 50010 57500 60000 61000 62000 64000 64500 65000 66000 67000 68000 70000 70100 70110 70120 71000 72000 73000 74000 77500 78000 78500 78510 80000 Sales Returns Warranty Expense Income from Investments Interest Income Cost of Goods Sold Freight Advertising Expense Auto Expenses Research and Development Depreciation Expense Warehouse Salaries Property Tax Expense Legal and Professional Expense Bad Debt Expense Insurance Expense Maintenance Expense Utilities Phone Postal Miscellaneous Office Expense Payroll Tax Exp Pension/Profit-Sharing Plan Ex Rent or Lease Expense Administrative Wages Expense Interest Expense Income Tax Expense - Federal Income Tax Expense - State Loss on Legal Settlement 141,569,221.61 4,302,951.46 897,140.01 208,974.39 31,212,334.17 133,000.00 4,633,383.82 80,495.32 3,605,133.96 1,622,425.99 853,942.65 61,136.04 135,642.99 76,373.78 128,033.21 17,023.27 1,550,989.06 3,000,000.00 2,603,485.87 16,875,305.98 875,000.00 2,365,000.00 429,000.00 19,172,000.00 $ 283,238,404.03 $ 283,238,404.03 Oxford Manufacturing, Inc. Pre-closing Trial Balance (Unaudited) December 31, 2019 Credit Debit $ 2,275.23 557,125.92 3,645,599.15 51,515,259.98 1,250,000.00 $ 1,239,009.75 67,724,527.50 846,000.00 3,424,213.78 8,540.00 117,000.00 674,313.92 2,929,097.13 609,500.00 Account ID 10100 10200 10300 10400 11000 11400 11500 12000 12300 14100 14200 14300 14400 14700 15000 15100 15200 17000 19000 19900 20000 23100 23200 23300 23350 23400 23500 23600 23700 23800 23900 24100 24200 24300 24700 27000 39003 39004 39005 40000 Account Description Cash on Hand Regular Checking Account Payroll Checking Account Savings Account Accounts Receivable Other Receivables Allowance for Doubtful Accounts Inventory Reserve for Inventory Obsolescence Prepaid Insurance Prepaid Rent Office Supplies Notes Receivable-Current Other Current Assets Land Buildings and Land Improvements Machinery, Equipment, Office Furniture Accum. Depreciation Investments Other Noncurrent Assets Accounts Payable Sales Tax Payable Wages Payable FICA Employee Withholding Medicare Withholding Federal Payroll Taxes Payable FUTA Tax Payable State Payroll Taxes Payable SUTA Tax Payable Employer FICA Payable Employer Medicare Payable Line of Credit Current Portion Long-Term Debt Notes Payable-Current Other Current Liabilities Notes Payable-Noncurrent Common Stock Paid-in Capital Retained Earnings Sales - Spotlight 1,998,780.39 53,840.59 1,933,095.91 8,439.65 11,414.99 107,086.12 55,106.86 8,439.65 11,414.99 44,403,000.00 12,000,000.00 8,105,000.00 7,423,000.00 6,590,983.64 242,713,452.88 242,713,452.88 11,100,220.89 1,158,128.47 1,426,089.31 131,881.46 2,166,000.00 40000 41000 42000 45000 46000 47000 50010 57500 60000 61000 62000 64000 64500 65000 66000 67000 68000 70000 70100 70110 70120 71000 72000 73000 74000 77500 78000 78500 78510 Sales - Spotlight Sales Returns Warranty Expense Income from Investments Interest Income Miscellaneous Income Cost of Goods Sold Freight Advertising Expense Auto Expenses Research and Development Depreciation Expense Warehouse Salaries Property Tax Expense Legal and Professional Expense Bad Debt Expense Insurance Expense Maintenance Expense Utilities Phone Postal Miscellaneous Office Expense Payroll Tax Exp Pension/Profit-Sharing Plan Ex Rent or Lease Expense Administrative Wages Expense Interest Expense Income Tax Expense - Federal Income Tax Expense - State 130, 196,645.26 4,240,263.09 1,036,854.01 210,502.80 528,870.44 446,000.00 4,720,715.56 99,332.45 4,913,224.45 36,106.92 35,502.87 137,332.18 52,599.02 77,803.61 24,891.82 1,577,811.85 3,300,000.00 1,206,574.00 16,197,225.43 2,591,736.50 8,900,000.00 3,100,000.00 $ 329,788,915.21 $ 329,788,915.21 Vertical Analysis Formula Vertical Analysis Formula (Income Statement) Income Statement Item Total Sales X 100 Vertical Analysis Formula (Balance Sheet) = Balance Sheet Item Total Assets (Liabilities) x 100 1024 x 461 x Horizontal Analysis Formula Horizontal Analysis (absolute) = Amount in Comparison Year - Amount in Base Year Horizontal Analysis (%) Amount in Comparison Year - Amount in Base Year X 100 Amount in Base Year 1. Perform preliminary analytical procedures on the financial statements. a. Perform horizontal (year-to-year changes) and vertical (common size financial statements) analyses using the provided trial balances. b. Calculate appropriate financial ratios. Assume the market value of the common stock is $24 million in both the current and prior years. (10 points) 2. Write a memo (labeled GA-4) highlighting what you believe are potential problem areas. In other words, are there any significant changes from year-to-year that we might need to investigate further, or does anything jump out at you? Include printouts of your calculations from 1. above as support and label them GA-4-1, GA-4-2, etc. (You're using GA-4 because other auditors have included other documents in the working paper file already - GA-1, -2, and -3.) (15 points) Oxford Manufacturing, Inc. Pre-closing Trial Balance (Audited) December 31, 2018 Credit Debit $ 1,987.28 198,116.52 3,044,958.13 16,410,902.71 $ 1,262,819.88 18,825,205.24 3,012,000.00 743,314.38 200,000.00 7,406.82 117,000.00 623,905.92 433,217.10 163,500.00 572,691.08 53,840.59 Account ID 10100 10200 10300 10400 11000 11500 12000 12300 14100 14200 14300 14400 14700 15000 15100 15200 17000 19000 19900 20000 23100 23200 23300 23350 23400 23500 23600 23700 23800 23900 24100 24200 24300 24700 27000 39003 39004 39005 40000 41000 Account Description Cash on Hand Regular Checking Account Payroll Checking Account Savings Account Accounts Receivable Allowance for Doubtful Accounts Inventory Reserve for Inventory Obsolescence Prepaid Insurance Prepaid Rent Office Supplies Notes Receivable-Current Other Current Assets Land Buildings and Land Improvements Machinery, Equipment, Office Furniture Accum. Depreciation Investments Other Noncurrent Assets Accounts Payable Sales Tax Payable Wages Payable FICA Employee Withholding Medicare Withholding Federal Payroll Taxes Payable FUTA Tax Payable State Payroll Taxes Payable SUTA Tax Payable Employer FICA Payable Employer Medicare Payable Line of Credit Current Portion Long-Term Debt Notes Payable-Current Other Current Liabilities Notes Payable-Noncurrent Common Stock Paid-in Capital Retained Earnings Sales Sales Returns 4,633,118.09 0.00 29,470.32 1,318.69 583.99 6,033.01 2,815.47 1,318.69 583.99 10,000,000.00 8,105,000.00 7,423,000.00 2,219,620.65 246,172,918.44 4,497,583.20 4,497,583.20 1,100,281.48 0.00 204,302.81 41000 42000 45000 46000 50010 57500 60000 61000 62000 64000 64500 65000 66000 67000 68000 70000 70100 70110 70120 71000 72000 73000 74000 77500 78000 78500 78510 80000 Sales Returns Warranty Expense Income from Investments Interest Income Cost of Goods Sold Freight Advertising Expense Auto Expenses Research and Development Depreciation Expense Warehouse Salaries Property Tax Expense Legal and Professional Expense Bad Debt Expense Insurance Expense Maintenance Expense Utilities Phone Postal Miscellaneous Office Expense Payroll Tax Exp Pension/Profit-Sharing Plan Ex Rent or Lease Expense Administrative Wages Expense Interest Expense Income Tax Expense - Federal Income Tax Expense - State Loss on Legal Settlement 141,569,221.61 4,302,951.46 897,140.01 208,974.39 31,212,334.17 133,000.00 4,633,383.82 80,495.32 3,605,133.96 1,622,425.99 853,942.65 61,136.04 135,642.99 76,373.78 128,033.21 17,023.27 1,550,989.06 3,000,000.00 2,603,485.87 16,875,305.98 875,000.00 2,365,000.00 429,000.00 19,172,000.00 $ 283,238,404.03 $ 283,238,404.03 Oxford Manufacturing, Inc. Pre-closing Trial Balance (Unaudited) December 31, 2019 Credit Debit $ 2,275.23 557,125.92 3,645,599.15 51,515,259.98 1,250,000.00 $ 1,239,009.75 67,724,527.50 846,000.00 3,424,213.78 8,540.00 117,000.00 674,313.92 2,929,097.13 609,500.00 Account ID 10100 10200 10300 10400 11000 11400 11500 12000 12300 14100 14200 14300 14400 14700 15000 15100 15200 17000 19000 19900 20000 23100 23200 23300 23350 23400 23500 23600 23700 23800 23900 24100 24200 24300 24700 27000 39003 39004 39005 40000 Account Description Cash on Hand Regular Checking Account Payroll Checking Account Savings Account Accounts Receivable Other Receivables Allowance for Doubtful Accounts Inventory Reserve for Inventory Obsolescence Prepaid Insurance Prepaid Rent Office Supplies Notes Receivable-Current Other Current Assets Land Buildings and Land Improvements Machinery, Equipment, Office Furniture Accum. Depreciation Investments Other Noncurrent Assets Accounts Payable Sales Tax Payable Wages Payable FICA Employee Withholding Medicare Withholding Federal Payroll Taxes Payable FUTA Tax Payable State Payroll Taxes Payable SUTA Tax Payable Employer FICA Payable Employer Medicare Payable Line of Credit Current Portion Long-Term Debt Notes Payable-Current Other Current Liabilities Notes Payable-Noncurrent Common Stock Paid-in Capital Retained Earnings Sales - Spotlight 1,998,780.39 53,840.59 1,933,095.91 8,439.65 11,414.99 107,086.12 55,106.86 8,439.65 11,414.99 44,403,000.00 12,000,000.00 8,105,000.00 7,423,000.00 6,590,983.64 242,713,452.88 242,713,452.88 11,100,220.89 1,158,128.47 1,426,089.31 131,881.46 2,166,000.00 40000 41000 42000 45000 46000 47000 50010 57500 60000 61000 62000 64000 64500 65000 66000 67000 68000 70000 70100 70110 70120 71000 72000 73000 74000 77500 78000 78500 78510 Sales - Spotlight Sales Returns Warranty Expense Income from Investments Interest Income Miscellaneous Income Cost of Goods Sold Freight Advertising Expense Auto Expenses Research and Development Depreciation Expense Warehouse Salaries Property Tax Expense Legal and Professional Expense Bad Debt Expense Insurance Expense Maintenance Expense Utilities Phone Postal Miscellaneous Office Expense Payroll Tax Exp Pension/Profit-Sharing Plan Ex Rent or Lease Expense Administrative Wages Expense Interest Expense Income Tax Expense - Federal Income Tax Expense - State 130, 196,645.26 4,240,263.09 1,036,854.01 210,502.80 528,870.44 446,000.00 4,720,715.56 99,332.45 4,913,224.45 36,106.92 35,502.87 137,332.18 52,599.02 77,803.61 24,891.82 1,577,811.85 3,300,000.00 1,206,574.00 16,197,225.43 2,591,736.50 8,900,000.00 3,100,000.00 $ 329,788,915.21 $ 329,788,915.21