Question

Cash and accounts receivable for Adams Company are provided below:

Current Prior
Year Year
Cash $70,000 $50,000
Accounts receivable (net) 70,400 80,000
Based on this information, What is the amount and percentage of increase or decrease that would be shown with horizontal analysis?

Answer 1

Horizontal analysis is a technique used in financial analysis to compare financial data over a period of time. To calculate the amount and percentage of increase or decrease for cash and accounts receivable, we need to compare the current year's amounts with the prior year's amounts.

Step-by-step explanation:

Horizontal analysis is a technique used in financial analysis to compare financial data over a period of time. It focuses on changes in financial statements such as income statements and balance sheets to identify trends and patterns.

To calculate the amount and percentage of increase or decrease for cash and accounts receivable, we need to compare the current year's amounts with the prior year's amounts.

For cash, the increase would be $70,000 - $50,000 = $20,000. The percentage increase would be ($20,000 / $50,000) * 100% = 40%.

For accounts receivable, the decrease would be $80,000 - $70,400 = $9,600. The percentage decrease would be ($9,600 / $80,000) * 100% = 12%.