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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
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 $604,800 $480,000 Cost of goods sold 520,800 420,000 Gross profit $84,000 $60,000 Selling expenses $24,360 $21,000 Administrative expenses 22,320 18,000 Total operating expenses $46,680 $39,000 Income before income tax $37,320 $21,000 Income tax expenses 14,900 8,400 Net income $22,420 $12,600 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 $604,800 $480,000 % Cost of goods sold 520,800 420,000 % Gross profit $84,000 $60,000 % Selling expenses 24,360 21,000 % Administrative expenses 22,320 18,000 % Total operating expenses $46,680 $39,000 % Income before income tax $37,320 $21,000 $ % Income tax expense 14,900 8,400 % Net income $22,420 $12,600 % b. The net income for Boone Company increased by 77.9% between years. This increase was the combined result of an in sales of 26% 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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