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Weygandt, Accounting Principles, 12e,
Chapter Eighteen
Solutions to Challenge Exercises
Challenge Exercise 18-1 – Solution
(a)
POLL CORPORATION
Condensed Income Statements
For the Years Ended December 31
2017
2016
Amount
Percent
Amount
Percent
Sales
Cost of goods sold
Gross profit
$900,000
570,000
330,000
100.0%
63.3%
36.7%
$700,000
450,000
250,000
100.0%
64.3%
35.7%
(b) Vertical analysis is used in both intra- and intercompany comparisons. Because vertical analysis evaluates
financial statement data by expressing each item in a financial statement as a percent of a base amount, it can
be used to determine trends over time within a company, or to discover relationships that differ from company
to company.
Challenge Exercise 18-2 – Solution
(a) ($10,300 + $16,200 + $11,000)/$17,370 = 2.16
(b) ($10,300 + $16,200)/$17,370 = 1.53
(f) $100,000/[($128,500 + $126,300)/2] = .78
(g) $20,000/[($128,500 + $126,300)/2] = 16%
(h) $20,000/[($111,130 + $95,200)/2] = 19%
