Survey of Accounting (Accounting I)
Solutions
Survey of Accounting (Accounting I)
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:
Instructions
Comment on the significant relationships revealed by ihe horizontal analysis prepared in (1).
Concept Introduction:
Horizontal Analysis:
Horizontal Analysis is used to analyze the trend of a particular item. Horizontal Analysis is done for particular items for different periods, for example, an analysis of the trend of sales for several years is done using the horizontal analysis.
To Indicate:
The significant findings from the horizontal analysis.
A comparative income statement using horizontal analysis is prepared as follows:
| Horizontal Analysis of Comparative Income Statement | ||||
| Increase (Decrease) | ||||
| Year | 20Y3 | 20Y2 | Amount | Percentage |
| A | B | C = (A-B) | C/B | |
| Sales | $ 862,000 | $ 785,000 | $ 77,000 | 9.8% |
| Cost of Goods Sold | $ 650,000 | $ 500,000 | $ 150,000 | 30.0% |
| Gross Profit | $ 212,000 | $ 285,000 | $ (73,000) | -25.6% |
| Selling expenses | $ 44,000 | $ 40,000 | $ 4,000 | 10... |
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