Income statement data for Moreno Company for two recent years ended December 31,
ID: 2425535 • Letter: I
Question
Income statement data for Moreno Company for two recent years ended December 31, are as follows:
Moreno Company
Comparative Income Statement
For the Years Ended December 31, 20--
1
Current Year
Previous Year
2
Sales
$1,120,000.00
$1,000,000.00
3
Cost of goods sold
971,250.00
875,000.00
4
Gross profit
$148,750.00
$125,000.00
5
Selling expenses
$71,250.00
$62,500.00
6
Administrative expenses
56,000.00
50,000.00
7
Total operating expenses
$127,250.00
$112,500.00
8
Income before income tax
$21,500.00
$12,500.00
9
Income tax expense
8,000.00
5,000.00
10
Net income
$13,500.00
$7,500.00
What conclusions can be drawn from the horizontal analysis?
Prepare a comparative income statement with horizontal analysis for the two-year period, indicating the increase (decrease) for the current year when compared with the previous year. Use the minus sign to indicate an amount or percent decrease. If required, round percentages to one decimal place.
Moreno Company
Comparative Income Statement
For the Years Ended December 31, 20--
1
Increase (Decrease)
Increase (Decrease)
2
Current Year
Previous Year
Amount
Percent
3
Sales
$1,120,000.00
$1,000,000.00
4
Cost of goods sold
971,250.00
875,000.00
5
Gross profit
$148,750.00
$125,000.00
6
Selling expenses
$71,250.00
$62,500.00
7
Administrative expenses
56,000.00
50,000.00
8
Total operating expenses
$127,250.00
$112,500.00
9
Income before income tax
$21,500.00
$12,500.00
10
Income tax expense
8,000.00
5,000.00
11
Net income
$13,500.00
$7,500.00
Moreno Company
Comparative Income Statement
For the Years Ended December 31, 20--
Explanation / Answer
Moreno Company
Comparative Income Statements
Conclusions:
Current Year Previous Year Increase / (decrease) Increase / (decrease) Amount Per cent Sales 1,120,000 1,000,000 120,000 12% Cost of goods sold 971,250 875,000 96,250 11% Gross profit 148,750 125,000 23,750 19% Selling expense 71,250 62,500 8,750 14% Administrative expense 56,000 50,000 6,000 12% Total operating expenses 127,250 112,500 14,750 13.11% Income before income tax 21,500 12,500 9,000 72% Income tax expense 8,000 5,000 3,000 60% Net income $13,500 $7,500 6,000 80%