The Galloway Corporation Data for the Current Year -What Would a Horizontal Analysis Report with Respect to Current

question 55

Multiple Choice

The Galloway Corporation data for the current year: $\begin{array}{|l|l|l|}\hline \text { Account } & \text { Current year } & \text { Prior year } \\\hline \text { Current assets } & \$ 46,200 & \$ 42,000 \\\hline \text { A/R } & \$ 69,000 & \$ 60,000 \\\hline \text { Mdse. Inventory } & \$ 67,500 & \$ 50,000 \\\hline \text { Current liabilities } & \$ 46,200 & \$ 33,000 \\\hline \text { Long-term liabilities } & \$ 26,600 & \$ 28,000 \\\hline \text { Common stock (5,000 shares) } & \$ 42,000 & \$ 35,000 \\\hline \text { Retained earnings } & \$ 67,900 & \$ 56,000 \\\hline \text { Net sales revenue } & \$ 625,000 & \$ 500,000 \\\hline \text { COGS } & \$ 520,000 & \$ 400,000 \\\hline \text { Gross Profit } & \$ 105,000 & \$ 100,000 \\\hline \text { Selling/General expenses } & \$ 45,000 & \$ 50,000 \\\hline \text { Net income before taxes } & \$ 60,000 & \$ 50,000 \\\hline \text { Income tax expense } & \$ 16,500 & \$ 15,000 \\\hline \text { Net Income } & \$ 43,500 & \$ 35,000\\\hline\end{array}$


-What would a horizontal analysis report with respect to current liabilities?

• A)Current liabilities are 71.43% of total capital.
• B)Current liabilities saw a 40.00% increase from the prior year to the current year.
• C)The current ratio is 1.00.
• D)Current liabilities saw a 7.39% increase from the prior year to the current year.

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Definitions:

Operating Lease

A lease agreement for the use of an asset without ownership, typically with shorter terms than a finance lease.

Lessor

An entity or individual who leases or rents out an asset to another, known as the lessee, under a lease agreement.

Lease Period

The specified duration for which a lease agreement is effective, giving the lessee the right to use an asset.

Financial Lease Arrangement

A type of lease where the lessee pays for the use of an asset for most of its useful life and has rights similar to ownership.