Question

# Horizontal Analysis of the Income Statement Income statement data for Boone Company for the years ended...

Horizontal Analysis of the Income Statement

Income statement data for Boone Company for the years ended December 31, 20Y5 and 20Y4, are as follows:

 20Y5 20Y4 Sales \$487,500 \$390,000 Cost of goods sold (414,800) (340,000) Gross profit \$72,700 \$50,000 Selling expenses \$(20,700) \$(18,000) Administrative expenses (18,450) (15,000) Total operating expenses \$(39,150) \$(33,000) Income before income tax \$33,550 \$17,000 Income tax expenses (13,400) (6,800) Net income \$20,150 \$10,200

a. Prepare a comparative income statement with horizontal analysis, indicating the increase (decrease) for 20Y5 when compared with 20Y4. Round percentage answers to one decimal place.

 Boone Company Comparative Income Statement For the Years Ended December 31, 20Y5 and 20Y4 20Y5 Amount 20Y4 Amount Increase (Decrease) Amount Increase (Decrease) Percent Sales \$487,500 \$390,000 \$ % Cost of goods sold (414,800) (340,000) % Gross profit \$72,700 \$50,000 \$ % Selling expenses \$(20,700) \$(18,000) \$ % Administrative expenses (18,450) (15,000) % Total operating expenses \$(39,150) \$(33,000) \$ % Income before income tax \$33,550 \$17,000 \$ % Income tax expense (13,400) (6,800) % Net income \$20,150 \$10,200 \$ %

b. All of the following statements regarding Boone Company are true except:

Solution.

 Boone Company Comparative Income Statement For the Years Ended December 31, 20Y5 and 20Y4 20Y5 Amount 20Y4 Amount Increase (Decrease) Amount Increase (Decrease) Percent Sales \$487,500 \$390,000 \$97,500 25.0 Cost of goods sold -414,800 -340,000 (\$74,800) 22.0 Gross profit \$72,700 \$50,000 \$22,700 45.4 Selling expenses (\$20,700) (\$18,000) (\$2,700) 15.0 Administrative expenses -18,450 -15,000 (\$3,450) 23.0 Total operating expenses (\$39,150) (\$33,000) (\$6,150) 18.6 Income before income tax \$33,550 \$17,000 \$16,550 97.4 Income tax expense -13,400 -6,800 (\$6,600) 97.1 Net income \$20,150 \$10,200 \$9,950 97.5

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