Using the base case, calculate the composite effects of a 5 percent increase in Sales, a 2 percent decrease in Gross Margin, and a 5 percent increase is SG&A as percent of Sales. Colossal Chemical Corporation Year Ended December 31, 2021 ($000,000 omitted) Base Case Combined Sales $2,110 2215.50 Cost of goods sold 1,245 1351.46 Selling, general, and 401 531.72 administrative expense Depreciation 121 121 Research and development 108 112.99 Total costs and expenses $ 1,875 $ 1996.17 Operating Income 235 219.33 Interest expense 34 34 Earnings before Income Taxes $201 $ 185.33 Provision for Income Taxes 40 Net Income 37.07 $161 $ 148.26 For the base case in this question, as a percentage of sales, COGS=59 percent, SGA = 19 percent, R&D = 5.1 percent. Depreciation, Interest expense are fixed as stated. Tax Rate is 20 percent.

Using the base case, calculate the composite effects of a 5 percent increase in Sales, a 2 percent decrease in Gross Margin, and a 5 percent increase is SG&A as percent of Sales. Colossal Chemical Corporation Year Ended December 31, 2021 ($000,000 omitted) Base Case Combined Sales $2,110 2215.50 Cost of goods sold 1,245 1351.46 Selling, general, and 401 531.72 administrative expense Depreciation 121 121 Research and development 108 112.99 Total costs and expenses $ 1,875 $ 1996.17 Operating Income 235 219.33 Interest expense 34 34 Earnings before Income Taxes $201 $ 185.33 Provision for Income Taxes 40 Net Income 37.07 $161 $ 148.26 For the base case in this question, as a percentage of sales, COGS=59 percent, SGA = 19 percent, R&D = 5.1 percent. Depreciation, Interest expense are fixed as stated. Tax Rate is 20 percent.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter22: Accounting For Changes And Errors.

Section: Chapter Questions

Problem 4RE: Refer to RE22-2. Assume Heller Company had sales revenue of 510,000 in 2019 and 650,000 in 2020....

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Refer to RE22-2. Assume Heller Company had sales revenue of 510,000 in 2019 and 650,000 in 2020. Prepare Hellers partial income statements (through gross profit) for 2019 and 2020. RE22-2 Heller Company began operations in 2019 and used the LIFO method to compute its 300,000 cost of goods sold for that year. At the beginning of 2020, Heller changed to the FIFO method. Heller determined that its cost of goods sold under FIFO would have been 250,000 in 2019. For 2020, Hellers cost of goods sold under FIFO was 360,000, while it would have been 410,000 under LIFO. Heller is subject to a 21% income tax rate. Compute the cumulative effect of the retrospective adjustment on prior years income (net of taxes) that Heller would report on its retained earnings statement for 2020.
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