Question
Horizontal Analysis for Income Statement For 20Y3, Greyhound Technology Company reported its most significant decline in net income in years. At the end of the
Horizontal Analysis for Income Statement
For 20Y3, Greyhound Technology Company reported its most significant decline in net income in years. At the end of the year, Duane Vogel, the president, is presented with the following condensed comparative income statement:
GREYHOUND TECHNOLOGY COMPANY Comparative Income Statement For the Years Ended December 31, 20Y3 and 20Y2 | |||
20Y3 | 20Y2 | ||
Sales | $ 862,000 | $ 785,000 | |
Cost of goods sold | (650,000) | (500,000) | |
Gross profit | $ 212,000 | $ 285,000 | |
Selling expenses | $ (44,000) | $ (40,000) | |
Administrative expenses | (27,000) | (25,000) | |
Total operating expenses | $ (71,000) | $ (65,000) | |
Income from operations | $ 141,000 | $ 220,000 | |
Other revenue | 2,300 | 2,000 | |
Income before income tax | $ 143,300 | $ 222,000 | |
Income tax expense | (13,000) | (20,000) | |
Net income | $ 130,300 | $ 202,000 |
Instructions:
Question Content Area
1. Prepare a comparative income statement with horizontal analysis for the two-year period, using 20Y2 as the base year. Enter decreases as negative amounts and negative percentages. Round percentage changes to one decimal place.
20Y3 | 20Y2 | Increase (Decrease) Amount | Increase (Decrease) Percent | |
Sales | $862,000 | $785,000 | $fill in the blank 96b1dafbb069013_1 | fill in the blank 96b1dafbb069013_2% |
Cost of goods sold | (650,000) | (500,000) | fill in the blank 96b1dafbb069013_3 | fill in the blank 96b1dafbb069013_4% |
Gross profit | $212,000 | $285,000 | $fill in the blank 96b1dafbb069013_5 | fill in the blank 96b1dafbb069013_6% |
Selling expenses | $(44,000) | $(40,000) | $fill in the blank 96b1dafbb069013_7 | fill in the blank 96b1dafbb069013_8% |
Administrative expenses | (27,000) | (25,000) | fill in the blank 96b1dafbb069013_9 | fill in the blank 96b1dafbb069013_10% |
Total operating expenses | $(71,000) | $(65,000) | $fill in the blank 96b1dafbb069013_11 | fill in the blank 96b1dafbb069013_12% |
Income from operations | $141,000 | $220,000 | $fill in the blank 96b1dafbb069013_13 | fill in the blank 96b1dafbb069013_14% |
Other revenue | 2,300 | 2,000 | fill in the blank 96b1dafbb069013_15 | fill in the blank 96b1dafbb069013_16% |
Income before income tax | $143,300 | $222,000 | $fill in the blank 96b1dafbb069013_17 | fill in the blank 96b1dafbb069013_18% |
Income tax expense | (13,000) | (20,000) | fill in the blank 96b1dafbb069013_19 | fill in the blank 96b1dafbb069013_20% |
Net income | $130,300 | $202,000 | $fill in the blank 96b1dafbb069013_21 | fill in the blank 96b1dafbb069013_22% |
Question Content Area
2. Based on the horizontal analysis prepared in 1 which of the following statements is correct? a. Net income declined from 20Y2 to 20Y3. b. Sales increased, but the cost of goods also increased causing gross profit to decline. c. Other revenues decreased slightly and income tax expense increased. d. Overall net income increased.
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