Question

BALANCE SHEET
December 31, 20X8 and 20X7
(in thousands)
	20X8	20X7
Assets
Current assets
Cash and cash equivalents	$3,019	$1,050
Trade receivables	485	450
Prepaid advertising expenses	59	609
Prepaid expenses and other current assets	175	230
Total current assets	3,738	2,339
Fixed assets, net	3,321	3,926
Total assets	$7,059	$6,265
Liabilities and shareholders' equity
Current liabilities
Accounts payable	$1,070	$ 909
Current maturities of notes payable	42	316
Deferred revenue	1,973	1,396
Other current liabilities	171	12
Total current liabilities	3,256	2,633
Long-term debt, less current maturity	34	176
Accrued liabilities	792	690
Deferred tax liability	15	145
Total liabilities	4,097	3,644
Shareholders' equity
Common stock	6,040	4,854
Retained earnings	(3,078)	(2,233)
Total shareholders' equity	2,962	2,621
Total liabilities plus shareholders' equity	$7,059	$6,265

DietWeb, Inc.
INCOME STATEMENT
Two Years Ended December 31, 20X8 and 20X7
(in thousands)
	20X8	20X7
Revenue	$19,166	$14,814
Costs and expenses
Cost of revenue	2,326	1,528
Product development	725	653
Sales and marketing	13,903	8,710
General and administrative	2,531	2,575
Interest Expense	13	22
Depreciation and amortization	629	661
Impairment of intangible assets	35	--
Total costs and expenses	20,162	14,149
Net income before taxes	(970)	665
Income tax benefit	129	125
Net income (loss)	$ (841)	$ 790

The auditor is trying to determine whether to use a horizontal or vertical analysis. In the analytic to be performed the auditor wants to understand whether the numbers as presented are reasonable.

The auditor decided to perform a horizontal analysis why did the auditor decide to so this instead of a vertical analysis?

For the balance sheet and income statement prepare a horizontal analysis

Answer 1