Comparative Information Taken from the Friction Company's Financial Statements Is

question 199

Essay

Comparative information taken from the Friction Company's financial statements is shown below: $$\begin{array} { l r r } & \text { Year } 2 & \text { Year } 1 \\\text { (a) Notes receivable } & \$ 25,500 & \$ 30,000 \\\text { (b) Accounts receivable } & 106,200 & 90,000 \\\text { (c) Retained earnings } & 77,000 & 70,000 \\\text { (d) Sales } & 654,000 & 600,000 \\\text { (e) Operating expenses } & 160,000 & 200,000 \\\text { (f) Income taxes payable } & 28,000 & 20,000\end{array}$$ Using horizontal analysis, show the percentage change and direction (increase or decrease) from Year 1 to Year 2 with Year 1 as the base year.

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Definitions:

Varying Inventory Levels

Adjusting the amount of stock on hand to meet changing demand conditions or to maximize operational efficiency.

Back Ordering

Refers to the process of accepting and processing orders for currently out-of-stock goods to be fulfilled when the stock is replenished.

Services

Activities or benefits provided to consumers or businesses that do not result in the ownership of tangible goods.

Manufacturing

The process of converting raw materials, components, or parts into finished goods that meet a customer's expectations or specifications.