Income statements for Perez Company for Year 3 and Year 4 follow: PEREZ COMPANY Income Statements Year 4 Sales $ 201,400 Cost of goods sold 143,800 Selling expenses 20,000 Administrative expenses 12,800 Interest expense 3,900 Total expenses $ 180,500 Income before taxes 20,900 Income taxes expense 5,400 Net income $ 15,500 Year 3 $ 181,400 121,800 18,000 14,800 5,900 $160,500 20,900 3,500 $ 17,400 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. PEREZ 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) % PEREZ COMPANY Vertical Analysis of Income Statements Percentage of Percentage of Sales Year 4 Sales Year 3 % % Sales Cost of goods sold Selling expenses Administrative expenses Interest expense Total expenses Income before taxes Income taxes expense Net income % %