Business, 13.05.2021 18:10 germainenez8403

Using the following selected items from the comparative balance sheet of Kato Company, illustrate horizontal and vertical analysis. HORIZONTAL VERTICAL
ANALYSIS ANALYSIS
December 31, December 31, 2019 December 31, 2020 December 31, 2019
2020
Accounts
Receivable $720,000 $630,000
Inventory 450,000 360,000

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Answer from: tchou8306

Kato Company

a. Vertical Analysis:

December 31, 2020 % December 31, 2019 %

Accounts

Receivable $720,000 61.5% $630,000 63.6%

Inventory 450,000 38.5% 360,000 36.4%

Total current assets $1,170,000 100% $990,000 100%

b. Horizontal Analysis:

December 31, 2020 Change December 31, 2019

Accounts

Receivable $720,000 +14.3% $630,000

Inventory 450,000 +25% 360,000

Total current assets $1,170,000 +18.2% $990,000

Explanation:

a) Data and Calculations:

December 31, 2020 December 31, 2019

Accounts

Receivable $720,000 $630,000

Inventory 450,000 360,000

Total current assets $1,170,000 $990,000

December 31, 2020 % December 31, 2019 %

Accounts

Receivable $720,000 61.5%(720/1,170) $630,000 63.6% (630/990)

Inventory 450,000 38.5% (450/1,170) 360,000 36.4%(360/990)

Total current assets $1,170,000 100% (1,170/1,170) $990,000 100% (990/990)

December 31, 2020 Change December 31, 2019

Accounts

Receivable $720,000 +14.3% (720-630)/630 $630,000

Inventory 450,000 +25% (450-360)/360 360,000

Total current assets $1,170,000 +18.2% (1,170-990)/990 $990,000

b) The vertical analysis of Kato's balance sheet items focuses on the relationships between the line items in a single reporting period, while horizontal analysis focuses on multiple reporting periods, reporting on the changes between the accounting periods.

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