Horizontal Analysis of Income Statement For 2014, Wiglaf Company reported its mo

Question

Horizontal Analysis of Income Statement

For 2014, Wiglaf Company reported its most significant decline in net income in years. At the end of the year, C.S. Lewis, the president, is presented with the following condensed comparative income statement:

Required:

1. Prepare a comparative income statement with horizontal analysis for the two-year period, using 2013 as the base year. Use the minus sign to indicate a decrease in the "Difference" columns. If required, round to one decimal place.

Wiglaf Company

Comparative Income Statement

For the Years Ended December 31, 2014 and 2013

2014

2013

Difference - Amount

Difference - Percent

Sales

$ 492,000

$ 410,000

$  

  %

Sales returns and allowances

25,851

21,000

  

  %

Net sales

$ 466,149

$ 389,000

$  

  %

Cost of goods sold

350,000

250,000

  

  %

Gross profit

$ 116,149

$ 139,000

$  

  %

Selling expenses

$ 49,500

$ 33,000

$  

  %

Administrative expenses

28,560

21,000

  

  %

Total operating expenses

$ 78,060

$ 54,000

$  

  %

Income from operations

$ 38,089

$ 85,000

$  

  %

Other income

1,970

1,600

  

  %

Income before income tax

$ 40,059

$ 86,600

$  

  %

Income tax expense

11,200

26,000

  

  %

Net income

$ 28,859

$ 60,600

$  

  %

2. Net income has SelectincreaseddecreasedCorrect 1 of Item 2 from 2013 to 2014. Net sales have SelectincreaseddecreasedCorrect 2 of Item 2; however, the cost of goods sold has SelectincreaseddecreasedCorrect 3 of Item 2, causing the gross profit to SelectincreasedecreaseCorrect 4 of Item 2.

Wiglaf Company
Comparative Income Statement
For the Years Ended December 31, 2014 and 2013 2014 2013 Sales $492,000 $410,000 Sales returns and allowances 25,851 21,000 Net sales $466,149 $389,000 Cost of goods sold 350,000 250,000 Gross profit $116,149 $139,000 Selling expenses $49,500 $33,000 Administrative expenses 28,560 21,000 Total operating expenses $78,060 $54,000 Income from operations $38,089 $85,000 Other income 1,970 1,600 Income before income tax $40,059 $86,600 Income tax expense 11,200 26,000 Net income $28,859 $60,600

Explanation / Answer

Wiglaf Company Comparative Income Statement For the Years Ended December 31, 2014 and 2013 2014 2013 Difference - Amount Difference - Percent Sales 492000 410000 82000 20 Sales returns and allowances 25851 21000 4851 23.1 Net sales 466149 389100 77049 19.8 Cost of goods sold 350000 250000 100000 40 Gross profit 116149 139000 -22851 -16.4 Selling expenses 49500 33000 16500 50 Administrative expenses 28560 21000 7560 36 Total operating expenses 78060 54000 24060 44.56 Income from operations 38089 85000 -46911 -55.2 Other income 1970 1600 370 23.13 Income before income tax 40059 86600 -46541 -53.7 Income tax expense 11200 26000 -14800 -56.9 Net income 28859 60600 -31741 -52.4

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