Horizontal Analysis of the Income Statement Income statement data for Boone Company for two recent years ended December 31, are as follows: Current Year Previous Year Sales $810,700 $670,000 Cost of goods sold 678,300 570,000 Gross profit $132,400 $100,000 Selling expenses $36,630 $33,000 Administrative expenses 33,320 28,000 Total operating expenses $69,950 $61,000 Income before income tax $62,450 $39,000 Income tax expenses 25,000 15,600 Net income $37,450 $23,400 a. Prepare a comparative income statement with horizontal analysis, indicating the increase (decrease) for the current year when compared with the previous year. If required, round to one decimal place. Boone Company Comparative Income Statement For the Years Ended December 31 Current year Amount Previous year Amount Increase (Decrease) Amount Increase (Decrease) Percent Sales $810,700 $670,000 % Cost of goods sold 678,300 570,000 Gross profit $132,400 $100,000 % Selling expenses 36,630 33,000 Administrative expenses 33,320 28,000 Total operating expenses $69,950 $61,000 % Income before income tax $62,450 $39,000 Income tax expense 25,000 15,600 Net income $37,450 $23,400 % b. The net income for Boone Company increased by 60% between years. This increase was the combined result of an in sales of 21% and percentage in cost of goods sold. The cost of goods sold increased at a rate than the increase in sales, thus causing the percentage increase in gross profit to be than the percentage increase in sales.
Horizontal Analysis of the Income Statement Income statement data for Boone Company for two recent years ended December 31, are as follows: Current Year Previous Year Sales $810,700 $670,000 Cost of goods sold 678,300 570,000 Gross profit $132,400 $100,000 Selling expenses $36,630 $33,000 Administrative expenses 33,320 28,000 Total operating expenses $69,950 $61,000 Income before income tax $62,450 $39,000 Income tax expenses 25,000 15,600 Net income $37,450 $23,400 a. Prepare a comparative income statement with horizontal analysis, indicating the increase (decrease) for the current year when compared with the previous year. If required, round to one decimal place. Boone Company Comparative Income Statement For the Years Ended December 31 Current year Amount Previous year Amount Increase (Decrease) Amount Increase (Decrease) Percent Sales $810,700 $670,000 % Cost of goods sold 678,300 570,000 Gross profit $132,400 $100,000 % Selling expenses 36,630 33,000 Administrative expenses 33,320 28,000 Total operating expenses $69,950 $61,000 % Income before income tax $62,450 $39,000 Income tax expense 25,000 15,600 Net income $37,450 $23,400 % b. The net income for Boone Company increased by 60% between years. This increase was the combined result of an in sales of 21% and percentage in cost of goods sold. The cost of goods sold increased at a rate than the increase in sales, thus causing the percentage increase in gross profit to be than the percentage increase in sales.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Horizontal Analysis of the Income Statement
Income statement data for Boone Company for two recent years ended December 31,
are as follows:
Current Year
Previous Year
Sales
$810,700
$670,000
Cost of goods sold
678,300
570,000
Gross profit
$132,400
$100,000
Selling expenses
$36,630
$33,000
Administrative expenses
33,320
28,000
Total operating expenses
$69,950
$61,000
Income before income tax
$62,450
$39,000
Income tax expenses
25,000
15,600
Net income
$37,450
$23,400
a. Prepare a comparative income statement with horizontal analysis, indicating the
increase (decrease) for the current year when compared with the previous year. If
required, round to one decimal place.
Boone Company
Comparative Income Statement
For the Years Ended December 31
Current year Amount
Previous year Amount
Increase (Decrease) Amount Increase (Decrease) Percent
Sales
$810,700
$670,000
%
Cost of goods sold
678,300
570,000
Gross profit
$132,400
$100,000
%
Selling expenses
36,630
33,000
Administrative expenses
33,320
28,000
Total operating expenses
$69,950
$61,000
%
Income before income tax $62,450
$39,000
Income tax expense
25,000
15,600
Net income
$37,450
$23,400
%
b. The net income for Boone Company increased by 60% between years. This increase
was the combined result of an
in sales of 21% and
percentage
in cost of goods sold. The cost of goods sold increased at a
rate than the increase in sales, thus causing the percentage increase in
gross profit to be
than the percentage increase in sales.
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