Question

For 20Y3, Greyhound Technology Company reported its most significant decline in net income in years. At the end of the year, Duane Vogel, the president, is presented with the following condensed comparative income statement:

GREYHOUND TECHNOLOGY COMPANY Comparative Income Statement For the Years Ended December 31, 20Y3 and 20Y2
	20Y3		20Y2
Sales	$ 862,000		$ 785,000
Cost of goods sold	(650,000)		(500,000)
Gross profit	$ 212,000		$ 285,000
Selling expenses	$ (44,000)		$ (40,000)
Administrative expenses	(27,000)		(25,000)
Total operating expenses	$ (71,000)		$ (65,000)
Income from operations	$ 141,000		$ 220,000
Other revenue	2,300		2,000
Income before income tax	$ 143,300		$ 222,000
Income tax expense	(13,000)		(20,000)
Net income	$ 130,300		$ 202,000

Instructions:

1. Prepare a comparative income statement with horizontal analysis for the two-year period, using 20Y2 as the base year. Enter decreases as negative amounts and negative percentages. Round percentage changes to one decimal place.

Greyhound Technology Company
Comparative Income Statement
For the Years Ended December 31, 20Y3 and 20Y2
	20Y3	20Y2	Increase (Decrease) Amount	Increase (Decrease) Percent
Sales	$862,000	$785,000	$fill in the blank	fill in the blank %
Cost of goods sold	(650,000)	(500,000)	fill in the blank	fill in the blank %
Gross profit	$212,000	$285,000	$fill in the blank	fill in the blank %
Selling expenses	$(44,000)	$(40,000)	$fill in the blank	fill in the blank %
Administrative expenses	(27,000)	(25,000)	fill in the blank	fill in the blank %
Total operating expenses	$(71,000)	$(65,000)	$fill in the blank	fill in the blank %
Income from operations	$141,000	$220,000	$fill in the blank	fill in the blank %
Other revenue	2,300	2,000	fill in the blank	fill in the blank %
Income before income tax	$143,300	$222,000	$fill in the blank	fill in the blank %
Income tax expense	(13,000)	(20,000)	fill in the blank	fill in the blank %
Net income	$130,300	$202,000	$fill in the blank	fill in the blank %

For 20Y6, Fishing Experiences Inc. initiated a sales promotion campaign that included the expenditure of an additional $45,000 for advertising. At the end of the year, Colt Schultz, the president, is presented with the following condensed comparative income statement:

FISHING EXPERIENCES INC. Comparative Income Statement For the Years Ended December 31, 20Y6 and 20Y5
	20Y6		20Y5
Sales	$1,200,000		$1,000,000
Cost of goods sold	(624,000)		(558,000)
Gross profit	$ 576,000		$ 442,000
Selling expenses	(120,000)		(75,000)
Administrative expenses	(50,000)		(50,000)
Total operating expenses	$ (170,000)		$ (125,000)
Operating income	$ 406,000		$ 317,000
Other revenue	30,000		30,000
Income before income tax	$ 436,000		$ 347,000
Income tax expense	(100,000)		(90,000)
Net income	$ 336,000		$ 257,000

Instructions:

1. Prepare a comparative income statement for the two-year period, presenting a vertical analysis of each item in relationship to sales for each of the years. Round percentages to one decimal place.

Fishing Experiences Inc.
Comparative Income Statement
For the Years Ended December 31, 20Y6 and 20Y5
	20Y6 Amount	20Y6 Percent	20Y5 Amount	20Y5 Percent
Sales	$1,200,000	fill in the blank %	$1,000,000	fill in the blank %
Cost of goods sold	(624,000)	fill in the blank %	(558,000)	fill in the blank %
Gross profit	$576,000	fill in the blank %	$442,000	fill in the blank %
Selling expenses	$(120,000)	fill in the blank %	$(75,000)	fill in the blank %
Administrative expenses	(50,000)	fill in the blank %	(50,000)	fill in the blank %
Total operating expenses	$(170,000)	fill in the blank %	$(125,000)	fill in the blank %
Operating income	$406,000	fill in the blank %	$317,000	fill in the blank %
Other revenue	30,000	fill in the blank %	30,000	fill in the blank %
Income before income tax	$436,000	fill in the blank %	$347,000	fill in the blank %
Income tax expense	(100,000)	fill in the blank %	(90,000)	fill in the blank %
Net income	$336,000	fill in the blank %	$257,000	fill in the blank %

Answer 1

Answer-

GREYHOUND TECHNOLOGY COMPANY
Comparative Income Statement
HORIZONTAL ANALYSIS
For the Years Ended 20Y3 and 20Y2
Particulars	20Y3	20Y2	Difference	%
	$	$	$
Sales	862000	785000	77000	9.8
Less- Cost of goods sold	650000	500000	150000	30.0
Gross profit	212000	285000	-73000	-25.6
Less- Expenses
Selling expenses	44000	40000	4000	10.0
Administrative expenses	27000	25000	2000	8.0
Total operating expenses	71000	65000	6000	9.2
Income from operations	141000	220000	-79000	-35.9
Other revenue	2300	2000	300	15.0
Income before income tax	143300	222000	-78700	-35.5
Income tax expense	13000	20000	-7000	-35.0
Net income	130300	202000	-71700	-35.5

Answer-

FISHING EXPERIENCES INC.
COMPARATIVE INCOME STATEMENT
VERTICAL ANALYSIS
FOR THE YEARS ENDED DECEMBER 31, 20Y6 AND 20Y5
Particulars	20Y6	20Y5	20Y1	20Y1
	$	PERCENT	$	PERCENT
Sales	1200000	100.0	1000000	100.0
Less- Cost of goods sold	624000	52.0	558000	55.8
Gross profit	576000	48.0	442000	44.2
Less- Expenses
Selling expenses	120000	10.0	75000	7.5
Administrative expenses	50000	4.2	50000	5.0
Total operating expenses	170000	14.2	125000	12.5
Income from operations	406000	33.8	317000	31.7
Other revenue	30000	2.5	30000	3.0
Income before income tax	436000	36.3	347000	34.7
Income tax expense	100000	8.3	90000	9.0
Net income	336000	28.0	257000	25.7