### Income Statements for Walton Company (Year 3 and Year 4)#### Income Statements:**Walton Company**- **Year 4:** - **Sales:** $200,300 - **Cost of Goods Sold:** $143,300 - **Selling Expenses:** $20,900 - **Administrative Expenses:** $12,900 - **Interest Expense:** $3,800 - **Total Expenses:** $180,300 - **Income Before Taxes:** $20,000 - **Income Taxes Expense:** $5,600 - **Net Income:** $14,400- **Year 3:** - **Sales:** $180,300 - **Cost of Goods Sold:** $121,300 - **Selling Expenses:** $18,900 - **Administrative Expenses:** $14,900 - **Interest Expense:** $5,200 - **Total Expenses:** $160,300 - **Income Before Taxes:** $20,000 - **Income Taxes Expense:** $3,300 - **Net Income:** $16,700#### Requirements:**a. Horizontal Analysis:**- Calculate the percentage change in each income statement component between Year 3 and Year 4.**b. Vertical Analysis:**- Calculate each income statement component as a percentage of sales for each year.### Vertical Analysis of Income Statements**Walton Company:**- **Percentage of Sales Year 4:** - Sales: 100.0% - Cost of Goods Sold: 71.0% - Selling Expenses: 10.4% - Administrative Expenses: 6.4% - Interest Expense: 1.9% - Total Expenses: 90.0% - Income Before Taxes: 10.0% - Income Taxes Expense: 3.0% - Net Income: 7.0%- **Percentage of Sales Year 3:** - Sales: 100.0% - Cost of Goods Sold: 67.0% - Selling Expenses: 10.0% - Administrative Expenses: 8.0% - Interest Expense: 3.0% - Total Expenses: 89.0% - Income Before Taxes: 11.0% - Income Taxes Expense: 2. ## Income Statements for Walton Company for Year 3 and Year 4### Income Statements**Walton Company**| Component | Year 4 | Year 3 ||-------------------------|----------|----------|| Sales | $200,300 | $180,300 || Cost of Goods Sold | $143,300 | $121,300 || Selling Expenses | $20,900 | $18,900 || Administrative Expenses | $13,000 | $14,900 || Interest Expense | $3,200 | $5,200 || Total Expenses | $180,300 | $160,300 || Income Before Taxes | $20,000 | $20,000 || Income Taxes Expense | $5,600 | $3,300 || Net Income | $14,400 | $16,700 |### Required Analysis1. **Horizontal Analysis**: Show the percentage change in each income statement component between Year 3 and Year 4.2. **Vertical Analysis**: Show each income statement component as a percentage of sales for each year.### Horizontal Analysis of Income Statements**Percentage Change Over Year 3**| Component | Percentage Change ||-------------------------|-------------------|| Sales | 11.1% || Cost of Goods Sold | 18.0% || Selling Expenses | 10.6% || Administrative Expenses | -12.8% || Interest Expense | -38.5% || Total Expenses | 12.5% || Income Before Taxes | 0.0% || Income Taxes Expense | 69.7% || Net Income | -13.8% |**Note**: Negative values indicate a decrease in Year 4 compared to Year 3. All percentage changes are rounded to one decimal place.### InstructionsComplete the analysis by calculating the required values for each tab provided on the website.- **Horizontal Analysis**: Examine the percentage change for every component to understand financial performance year-over-year.- **Vertical Analysis**: Evaluate the proportion of each component relative to sales, offering insight into expense distribution and profitability.

Vertical analysis is a financial statement analytical method in which each asset and liability is represented as a percentage of the total assets. One year is taken as base year.Under vertical analysis, income statement line items are represented as a percentage of gross sales.Under Horizontal Analysis, difference in current year's figures and base year figures are represented as percentage change.WALTON COMPANYIncome StatementParticularsYear 3 ($)Year 4 ($)difference ($)% ageSales1803002003002000011.1%Cost of goods sold1213001433002200018.1%Selling expenses1890020900200010.6%Administrative expenses1490012900-2000-13.4%Interest Expense52003200-2000-38.5%Total Expenses1603001803002000012.5%Income before taxes200002000000.0%Income Tax expense33005600230069.7%Net Income1670014400-2300-13.8%WALTON COMPANYIncome StatementParticularsYear 4 ($)%Year 3 ($)%Sales200300100.0%180300100.0%Cost of goods sold14330071.5%12130067.3%Selling expense2090010.4%1890010.5%Administrative expenses129006.4%149008.3%Interest Expense32001.6%52002.9%Total Expenses18030090.0%16030088.9%Income before taxes2000010.0%2000011.1%Income Tax expense56002.8%33001.8%Net Income144007.2%167009.3%Please refer above two steps.

Business

Accounting

Required a. Perform a horizontal analysis, showing the percentage change in each income statement component between Year 3 and Year 4. b. Perform a vertical analysis, showing each income statement component as a percentage of sales for each year.

Required a. Perform a horizontal analysis, showing the percentage change in each income statement component between Year 3 and Year 4. b. Perform a vertical analysis, showing each income statement component as a percentage of sales for each year.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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