The following is a summary of information presented on the financial statements of a company on December 31, 2019. Account 2019 2018 Net Sales Revenue $600,000 $504,000 Cost of Goods Sold 456,000 405,000 Gross Profit $144,000 $99,000 Selling Expenses 51,000 54,000 Net Income Before Income Tax Expense $93,000 $45,000 Income Tax Expense 39,000 23,000 Net Income $54,000 $22,000 With respect to net income, a horizontal analysis reveals

A. a 145.45% decrease in net income

B. a $22,000 increase in net income

C. that net income is 14.55% of net sales revenue

D. a 145.45% increase in net income

Question

Bitsy

Business

8 May, 09:33

The following is a summary of information presented on the financial statements of a company on December 31, 2019. Account 2019 2018 Net Sales Revenue $600,000 $504,000 Cost of Goods Sold 456,000 405,000 Gross Profit $144,000 $99,000 Selling Expenses 51,000 54,000 Net Income Before Income Tax Expense $93,000 $45,000 Income Tax Expense 39,000 23,000 Net Income $54,000 $22,000 With respect to net income, a horizontal analysis reveals

A. a 145.45% decrease in net income

B. a $22,000 increase in net income

C. that net income is 14.55% of net sales revenue

D. a 145.45% increase in net income

+3

Answers (1)

Know the Answer?

Sherlyn Cooke · Answer 1

Option (D) is correct.

Explanation:

Horizontal analysis is a technique used to find a trend in the corresponding figures of the financial year for one or more than one years.

In this question base year will be 2018.

Therefore,

Percentage change:

= [ (Net income of 2019 - Net income of 2018) : Net income of 2018] * 100

= [ ($54,000 - $22,000) : 22,000] * 100

= 1.4545 * 100

= 145.45% increase

In Horizontal analysis a year is taken as base year on the basis of which complete analysis will be done.

It is done by calculating percentage change.