Question 3.10: Vertical Analysis Two income statements for Fortson Company ......

Financial Accounting [EXP-43430]

Vertical Analysis

Two income statements for Fortson Company are shown below.

Fortson Company
Income Statements
For the Years Ended December 31, 2012 and 2011 012 2011

a. Prepare a vertical analysis of Fortson Company’s income statements.

b. Does the vertical analysis indicate a favorable or unfavorable trend?

	2012	2011
Fees earned	$425,000	$375,000
Operating expenses	$\underline{263,500}$	$\underline{210,000}$
Operating income	$\underline{\$ 161,500}$	$\underline{\$ 165,000}$

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b. An unfavorable trend of increasing operating expenses and decreasing operating income is indicated.

a.

Fortson Company
Income Statements
For the Years Ended December 31, 2012 and 2011

	2012		2011
	Amount	Percent	Amount	Percent
Fees earned	$425,000	100%	$375,000	100%
Operating expenses	$\underline{263,500}$	62	$\underline{210,000}$	56
Operating income	$\underline{\$ 161,500}$	$\underline{38 \%}$	$\underline{\$ 165,000}$	$\underline{44 \%}$

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