Question

Exercise 18-06

Here are the comparative income statements of Delaney Corporation.

Delaney Corporation Comparative Income Statements For the Years Ended December 31
		2020			2019
Net sales		$620,000			$512,000
Cost of goods sold		492,280			428,544
Gross profit		127,720			83,456
Operating expenses		86,800			49,152
Net income		$ 40,920			$ 34,304

(a)

Prepare a horizontal analysis of the income statement data for Delaney Corporation, using 2019 as a base. (Show the amounts of increase or decrease.) (Enter negative amounts and percentages using either a negative sign preceding the number e.g. -45, -45% or parentheses e.g. (45), (45%). Round percentages to 1 decimal place, e.g. 12.3%.)

DELANEY CORPORATION Condensed Income Statements For the Months Ended December 31 December 31 For the Years Ended December 31
					Increase or (Decrease) During 2020
	2020		2019		Amount		Percentage
Net sales	$620,000		$512,000		$		%
Cost of goods sold	492,280		428,544				%
Gross profit	127,720		83,456				%
Operating expenses	86,800		49,152				%
Net income	$40,920		$34,304		$		%

(b)

Prepare a vertical analysis of the income statement data for Delaney Corporation for both years. (Round percentages to 1 decimal place, e.g. 12.3%.)

DELANEY CORPORATION Condensed Income Statements For the Years Ended December 31 For the Months Ended December 31 December 31
	2020				2019
	Amount		Percent		Amount		Percent
Net sales	$620,000		%		$512,000		%
Cost of goods sold	492,280		%		428,544		%
Gross profit	127,720		%		83,456		%
Operating expenses	86,800		%		49,152		%
Net income	$ 40,920		%		$ 34,304		%

Answer 1

(a ) Horizontal Analysis Delay Corporation Condensed Income statements For the year ended December 31 Increase or Decrease Percentage 2020 (A) 2019 (B) (A-B) (A-B)/B*100 Net sales $620,000 $512,000 $108,000 21.1% Cost of goods sold $492,280 $428,544 $ 63,736 14.9% Gross Profit $ 127,720 $ 83,456 $ 44,264 53.0% Operating expenses $ 86,800 $ 49,152 $ 37,648 76.6% Net Income $ 40,920 $ 34,304 $ 6,616 19.3% (b) Vertical Analysis Vertical analysis formula = Income statement Item/Sales *100 Delay Corporation Condensed Income statements For the year ended December 31 2020 Percent 2019 Net sales $620,000 100.0% $512,000 Cost of goods sold $492.280 79.4% $428,544 Gross Profit $ 127,720 20.6% $ 83,456 Operating expenses $ 86,800 14.0% $ 49,152 Net Income $ 40,920 6.6% $ 34,304 Percent 100.0% 83.7% 16.3% 9.6% 6.7%