Example #1.

Vertical Analysis of Financial Statement

Excelsior Enterprises
Income Statement
For the Month Ended June 30, 2010

Net Sales .................................................................................................................................................. Php 150 000.00

Less: Cost of Sales ................................................................................................................................. Php 90 000.00

Gross Profit .............................................................................................................................................. Php 60 000.00

Less: Operating Expenses .................................................................................................................... Php 35 000.00

Net Income .............................................................................................................................................. Php 25 000.00

Solution:
Excelsior Enterprises
Income Statement
For the Month Ended June 30, 2010

Net Sales .................................................................................................................................................. 100%

Less: Cost of Sales (90/150) ................................................................................................................. 60.00

Gross Profit (60/150) ............................................................................................................................. 40.00

Less: Operating Expenses (35/150) ................................................................................................... 23.33

Net Income (25/150) ............................................................................................................................. 16.67%

Example #2 Horizontal Analysis of Financial Statement

Trend Analysis of the Comparative Income Statements of a certain firm.
Increase/ (Decrease)
201B 201A Amount %
(P000) (P000) (P000) R
Q2 Q1
Sales 150 125 25 (150-125) 20.00% (25/125)
Cost of Sales 90 70 20 (90-70) 28.57 (20/70)
Gross Profit 70 55 15 (70-55) 27.27 (15/55)
Operating Expenses 35 45 (10) (35-45) (22.22) [(10)/45]
Net Income 25 10 15 (25-10) 150.00% (15/10)
Seatwork:
I. Fill in the following sections of a balance sheet. Place your computation on a separate sheet.

Amount Percent
Assets:
Current Assets Php 135 250 1. _____________
Fixed Assets 85 500 2. _____________
Total Assets Pp 220 750 100.00%
Liabilities:
Current Liabilities Php 20 000 3. ____________
Long-term Liabilities 50 000 4. ____________
Total Liabilities Php 70 000 5. ____________
Stockholder’s Equity:
Capital stock Php 100 000 6. ____________
Retained Earnings 50 750 7. ____________
Total Stockholder’s Equity Php 150 750 8. ____________

Total Liabilities and Stockholders’ Equity Php 220 750 100.00%

II. Complete the amount and percent of the following:

Increase/(Decrease)
2010 2011 Amount %
Sales Php 328 560 Php 294 600 9. _____________ 10. ________
Cost of Sales 150 640 147 300 11. ____________ 12. ________
Gross Profit Php 177 920 Php 147 300 13. ____________ 14. ________
Operating Expenses 42 800 41 260 15. ____________ 16. ________
Net profit Php 135 120 Php 106 040 17. ____________ 18. ________

III. Prepare an income statement.

A trading firm purchased a lot for merchandise that costs Php100,000.00 for which it paid Php10,000.00 for
transportation. The firm sold the entire lot for Php180,000.00. The firm incurred the following operating expenses:

Rent Php 3 000

Advertising Php 15 000
Store Supplies Php 7 000
Office Supplies Php 4 000
 Heat, Light, and Water Php 9 000
Miscellaneous Expenses Php 5 000

The firm borrowed money from the bank for which it paid Php6,000.00 in interest.

Answer key:
I. Fill in the following sections of a balance sheet. Place your computation on a separate sheet.

Amount Percent
Assets:
Current Assets Php 135 250 61.27%
Fixed Assets 85 500 38.73%
Total Assets Php 220 750 100.00%
Liabilities:
Current Liabilities Php 20 000 9.06%
Long-term Liabilities 50 000 22.65
Total Liabilities Php 70 000 31.71%
Stockholder’s Equity:
Capital stock Php 100 000 45.30%
Retained Earnings 50 750 22.99
Total Stockholder’s Equity Php 150 750 68.29%

Total Liabilities and Stockholders’ Equity Php 220 750 100.00%

II. Complete the amount and percent of the following:

Increase/(Decrease)
2010 (O) 2011 (N) Amount (N-O) % (A/O)
Sales Php 328 560 Php 294 600 (33960) (10.34%)
Cost of Sales 150 640 147 300 (3340) (2.22%)
Gross Profit Php 177 920 Php 147 300 (30620) (17.21%)
Operating Expenses 42 800 41 260 (1540) (3.60%)
Net profit Php 135 120 Php 106 040 (29080) (21.52%)

III. Prepare an income statement.

A trading firm purchased a lot for merchandise that costs Php100,000.00 for which it paid Php10,000.00 for
transportation. The firm sold the entire lot for Php180,000.00. The firm incurred the following operating expenses:

Rent Php 3 000

 Advertising Php 15 000
Store Supplies Php 7 000
Office Supplies Php 4 000
Heat, Light, and Water Php 9 000
Miscellaneous Expenses Php 5 000

The firm borrowed money from the bank for which it paid Php6,000.00 in interest.

1. Sales 2. Php 180,000.00

Cost of Sales:

3. Purchased (Merchandise) 4. Php 100,000.00

5. Transportation 6. 10,000.00 7. - (110,000.00)

8. Gross Profit 9. Php 70,000.00

Operating Expenses:

10. Rent 11. Php 3,000.00

12. Advertising 13. 15,000.00

14. Store Supplies 15. 7,000.00

16. Office Supplies 17. 4,000.00

18. Heat, Light, and Water 19. 9,000.00

20. Miscellaneous Expenses 21. 5,000.00 22. - (43,000.00)

Operating Profit: 23. Php 27,000.00

Other income

24. Not specified 25. Not specified

Other Expense

26. Interest Expense 27. (6,000.00) 28. + (6,000.00)

NET PROFIT 29. PHP 21,000.00