Question

Selected comparative financial statements of Haroun Company follow.

HAROUN COMPANY
Comparative Income Statements
For Years Ended December 31, 2019–2013
($ thousands)	2019			2018			2017			2016			2015			2014			2013
Sales	$	1,811		$	1,587		$	1,443		$	1,323		$	1,235		$	1,148		$	941
Cost of goods sold		1,302			1,059			911			797			741			693			552
Gross profit		509			528			532			526			494			455			389
Operating expenses		388			303			278			205			178			176			146
Net income	$	121		$	225		$	254		$	321		$	316		$	279		$	243

HAROUN COMPANY
Comparative Balance Sheets
December 31, 2019–2013
($ thousands)	2019			2018			2017			2016			2015			2014			2013
Assets
Cash	$	119		$	157		$	163		$	166		$	173		$	171		$	176
Accounts receivable, net		853			896			811			622			548			519			366
Merchandise inventory		3,086			2,247			1,963			1,654			1,486			1,262			915
Other current assets		79			71			44			79			67			67			35
Long-term investments		0			0			0			243			243			243			243
Plant assets, net		3,777			3,762			3,291			1,857			1,918			1,706			1,465
Total assets	$	7,914		$	7,133		$	6,272		$	4,621		$	4,435		$	3,968		$	3,200
Liabilities and Equity
Current liabilities	$	1,989		$	1,673		$	1,097		$	913		$	792		$	749		$	483
Long-term liabilities		2,125			1,851			1,801			836			854			925			694
Common stock		1,440			1,440			1,440			1,280			1,280			1,120			1,120
Other paid-in capital		360			360			360			320			320			280			280
Retained earnings		2,000			1,809			1,574			1,272			1,189			894			623
Total liabilities and equity	$	7,914		$	7,133		$	6,272		$	4,621		$	4,435		$	3,968		$	3,200

Required:
1. Complete the below table to calculate the trend percents for all components of both statements using 2013 as the base year.
2. Refer to the results from part 1. (a) Did sales grow steadily over this period? (b) Did net income as a percent of sales grow over the past four years? (c) Did inventory increase over this period?

HAROUN COMPANY
Income Statement Trends
For Years Ended December 31, 2019–2013
	2019		2018		2017		2016		2015		2014		2013
Sales		%		%		%		%		%		%	100.0	%
Cost of goods sold													100.0
Gross profit													100.0
Operating expenses													100.0
Net income		%		%		%		%		%		%	100.0	%

Answer 1

Answer to part 1

Trend percentage = (Absolute value of the item / Absolute value of the same item in the base year ) * 100

HAROUN COMPANY
Income Statement Trends
For Years Ended December 31, 2019–2013
	2019		2018		2017		2016		2015		2014		2013
Sales	192	%	169	%	153	%	141	%	131	%	122	%	100.0	%
Cost of goods sold	236	%	192	%	165	%	144	%	134	%	126	%	100.0	%
Gross profit	131	%	136	%	137	%	135	%	127	%	117	%	100.0	%
Operating expenses	266	%	208	%	190	%	140	%	122	%	121	%	100.0	%
Net income	50	%	93	%	105	%	132	%	130	%	115	%	100.0	%

(Note : Values are rounded off to nearest tens)

Answer to the Part 2 of the question

(a) Yes, sales grew steadily over the years, as the percentages are increasing from the base year to the current year.

(b) Income as a percentage of sales in the past 4 years is as follows

Year	2019	2018	2017	2016
Income as a percentage of sales(%)	7	14	18	24

(Note : Values are rounded off to nearest tens)

Income as a percentage of sales is not increasing over the years as the interpretation from the above table.

(c) From the balance sheet values it is clear that the inventory also increased over this period.