Question
Assume the average cost of computer equipment fell 24.5 percent between 2016 and 2017. Let's see whether these changes are reflected in the income
Assume the average cost of computer equipment fell 24.5 percent between 2016 and 2017. Let's see whether these changes are reflected in the income statement of Computer Tycoon Inc. for the year ended December 31, 2017. Sales Revenues Cost of Goods Sold 2017 $100,300 2016 $128,468 61,700 77,081 Gross Profit 38,600 51,387 Selling, General, and Administrative Expenses 30,200 30,200 Interest Expense Income Before Income Tax Expense Income Tax Expense Net Income 586 480 7,814 4,708 20,707 6,737 $ 3,106 $ 13,970 Required: 1-a. Conduct a horizontal analysis by calculating the year-over-year changes in each line item, expressed in dollars and in percentages. (Round your "Percentage" to 1 decimal place. Any decrease in amounts should be indicated with minus sign) Sales revenues COMPUTER TYCOON, INC. Horizontal Analysis of Income Statements For the Years Ended December 31 Costs of goods sold Gross profit Selling, General, and Administrative expenses Interest expense Income before income tax expense Income tax expense Net income 2017 2016 Dollars Change in Percentage $ 100,300 $ 128,468 61,700 77,081 38,600 51,387 30,200 30,200 586 480 7,814 20,707 4,708 6,737 $ 3,106 $ 13,970 % 1-b. Not available in Connect. 2-a. Conduct a vertical analysis by expressing each line as a percentage of total revenues. (Round your answers to 1 decimal place. Input all amounts as positive values.) COMPUTER TYCOON, INC. Vertical Analysis of Income Statements For the Years Ended December 31 2017 2016 Sales revenues $ 100,300 % $ 128.468 % Costs of goods sold 61,700 % 77,081 % Gross profit 38,600 % 51,387 % Selling, General, and Administrative expenses 30.200 % 30,200 % 586 % 480 % Interest expense 7,814 % 20,707 % Income before income tax expense 4,708 % 6,737 % Income tax expense Net income $ 3,106 % $ 13,970 % 2-b. Excluding income tax, interest, and selling, general, and administrative expenses, did Computer Tycoon earn more profit per dollar of sales in 2017 compared to 2016? Yes O No.
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