Exercise 9-3 Horizontal and vertical analysis LO 9-1 Income statements for Munoz

Question

Exercise 9-3 Horizontal and vertical analysis LO 9-1

Income statements for Munoz Company for 2018 and 2019 follow:

Required

Perform a horizontal analysis, showing the percentage change in each income statement component between 2018 and 2019.

Perform a vertical analysis, showing each income statement component as a percentage of sales for each year.

MUNOZ COMPANY
Income Statements 2019 2018 Sales $ 201,200 $ 181,200 Cost of goods sold 143,100 121,100 Selling expenses 21,800 19,800 Administrative expenses 12,700 14,700 Interest expense 3,300 5,300 Total expenses $ 180,900 $ 160,900 Income before taxes 20,300 20,300 Income taxes expense 6,800 3,300 Net income $ 13,500 $ 17,000

Explanation / Answer

MUNOZ COMPANY Income Statements 2019 2018 Amount increase(decrease) Percentage increase(decrease) Sales 2,01,200 1,81,200 20,000 11.0% Cost of goods sold 1,43,100 1,21,100 22,000 18.2% Selling expenses 21,800 19,800 2,000 10.1% Administrative expenses 12,700 14,700 -2,000 -13.6% Interest expense 3,300 5,300 -2,000 -37.7% Total expenses 1,80,900 1,60,900 20,000 12.4% Income before taxes 20,300 20,300 0 0.0% Income taxes expense 6,800 3,300 3,500 106.1% Net income 13,500 17,000 -3,500 -20.6% 2 MUNOZ COMPANY Income Statements 2019 % of sales 2018 % of sales Sales 2,01,200 100.0% 1,81,200 100.0% Cost of goods sold 1,43,100 71.1% 1,21,100 66.8% Selling expenses 21,800 10.8% 19,800 10.9% Administrative expenses 12,700 6.3% 14,700 8.1% Interest expense 3,300 1.6% 5,300 2.9% Total expenses 1,80,900 89.9% 1,60,900 88.8% Income before taxes 20,300 10.1% 20,300 11.2% Income taxes expense 6,800 3.4% 3,300 1.8% Net income 13,500 6.7% 17,000 9.4%

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