A) The following data were drawn from the accounting records of Fox Company. Year 2 Year 1
Question:
A) The following data were drawn from the accounting records of Fox Company.
Year 2 | Year 1 | |||||
Revenue | $ | 120,000 | $ | 100,000 | ||
Operating Expenses | 78,000 | 60,000 | ||||
Net Income | 42,000 | 40,000 |
If the year to year trends shown in these data continue
Multiple Choice
a. revenue for Year 3 will be $144,000.
b. operating expenses for Year 3 will be $101,400.
c. net income for Year 3 will be $42,600.
d. All of the answers are correct.
B).The following information was drawn from the records of Milan Company.
Year 2 | Year 1 | |||||||
Revenue | $ | 120,000 | $ | 100,000 | ||||
Cost of goods sold | (78,000 | ) | (60,000 | ) | ||||
Gross Margin | 42,000 | 40,000 | ||||||
Operating Expenses | (24,000 | ) | (20,000 | ) | ||||
Net Income | $ | 18,000 | $ | 20,000 |
Vertical analysis suggests that the most likely explanation as to why net income decreased is
Multiple Choice
a. the company was unable to pass on increases in the cost of its good to its customers.
b. the company was unable to pass on increases in the operating expenses to its customers.
c. Both explanations are rational.
d. Neither explanation is rational.
Government and Not for Profit Accounting Concepts and Practices
ISBN: 978-1118155974
6th edition
Authors: Michael H. Granof, Saleha B. Khumawala