Rags to Riches Selected data from the financial statements are provided below:
$\begin{array}{ll}
& \underline{ 2015 } & \underline{ 2014 } \
\text { Accounts Receivable } &\$ 120,000 & \$ 76,000 \
\text { Inventory } &24,000 & 32,000 \
\text {Total Assets } &900,000 & 760,000 \
\text { Net Sales } &760,000 & 540,000 \
\text { Cost of Goods Sold } &320,000 & 420,000
\end{array}$
-Refer to Rags to Riches.Which of the following would result from a horizontal analysis of the company's balance sheet?
A)Accounts receivable increased $22,000 or 57.9% during 2015.
B)Accounts receivable is five times larger than inventory in 2015.
C)Accounts receivable is 13.3% of total assets in 2015.
D)The accounts receivable turnover ratio is 7.76 in 2015.

Question

Rags to Riches Selected data from the financial statements are provided below:
$\begin{array}{ll}
& \underline{ 2015 } &  \underline{ 2014 } \
 \text { Accounts Receivable } &\$ 120,000 & \$ 76,000 \
 \text { Inventory } &24,000 & 32,000 \
 \text {Total Assets  } &900,000 & 760,000 \
 \text { Net Sales } &760,000 & 540,000 \
 \text { Cost of Goods Sold } &320,000 & 420,000
\end{array}$ 
-Refer to Rags to Riches.Which of the following would result from a horizontal analysis of the company's balance sheet?
A)Accounts receivable increased $22,000 or 57.9% during 2015.
B)Accounts receivable is five times larger than inventory in 2015.
C)Accounts receivable is 13.3% of total assets in 2015.
D)The accounts receivable turnover ratio is 7.76 in 2015.

Quizplus · Accepted Answer

A horizontal analysis compares the same item from two different financial periods. Accounts receivable increased by $44,000 ($120,000 - $76,000), which is a 57.9% increase ($44,000/$76,000 x 100%). Therefore, option A is correct. Option B is incorrect because it compares two different items. Option C is incorrect because it calculates a ratio, not a horizontal analysis. Option D is incorrect because it requires additional data such as credit sales to calculate the receivables turnover ratio.

Rags to Riches Selected Data from the Financial Statements Are