Exercise 13-3A Horizontal and vertical analysis LO 13-1

Income statements for Baird Company for Year 3 and Year 4 follow:

BAIRD COMPANY Income Statements
	Year 4				Year 3
Sales	$	200,900			$	180,900
Cost of goods sold		143,800				121,800
Selling expenses		20,700				18,700
Administrative expenses		12,800				14,800
Interest expense		3,500				5,500
Total expenses	$	180,800			$	160,800
Income before taxes		20,100				20,100
Income taxes expense		6,500				3,600
Net income	$	13,600			$	16,500

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.

BAIRD COMPANY
Horizontal Analysis of Income Statements
	Percentage Change over Year 3
Sales		%
Cost of goods sold
Selling expenses
Administrative expenses
Interest expense
Total expenses
Income before taxes
Income taxes expense
Net income (loss)		%

BAIRD COMPANY
Vertical Analysis of Income Statements
	Percentage of Sales Year 4		Percentage of Sales Year 3
Sales		%		%
Cost of goods sold
Selling expenses
Administrative expenses
Interest expense
Total expenses
Income before taxes
Income taxes expense
Net income		%		%