Problem: Module 4 Textbook Problem 1 Learning Objective: 4-1 Differentiate between horizontal and vertical analysis Income statements for Fanning Company for Year 3 and Year 4 follow: FANNING COMPANY Income Statements Year 4 Sales $ 201,100 Cost of goods sold 143,400 Selling expenses 20,800 Administrative expenses 12,600 Interest expense 3,300 Total expenses $180, 100 Income before taxes 21, eee Income taxes expense 5,300 Net income $ 15,700 Year 3 $181, 100 121,400 18,808 14,689 5,380 $160,100 21,00 3,900 $ 17,100 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, Perform a horizontal analysis, showing the percentage change in each income statement component between Year 3 and Year 4. (Negative answers should be indicated by a minus sign. Round your percentage answers to 1 decimal place. (., 0,234 should be entered as 23.4).) FANNING COMPANY Horizontal Analysis of Income Statements Percentage Change over Year 3 10.01% 15,3 Sales Cost of goods sold Selling expenses Administrative expenses Interest expense Total expenses Income before taxes Income taxes expense Net income (loss) % FA Required B > Required A Required B Perform a vertical analysis, showing each income statement component as a percentage of sales for each year. (Percentages may not add exactly due to rounding. Round your percentage answers to 1 decimal place. (i.e., 0.234 should be entered as 23.4).) FANNING 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