Question

CAMPBELL COMPANY Income Statements 2019 Sales $ 201,500 Cost of goods sold 143,200 Selling expenses 20,300 Administrative expenses 12,600 Interest expense 3,100 Total expenses $179,200 Income before taxes 22,300 Income taxes expense 5,900 Net income $ 16,400 2018 $181,500 121,200 18,300 14,600 5,100 $159,200 22,300 3,200 $ 19,100

Required

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

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

Answer 1

CAMPBELL COMPANY HORIZONTAL Analysis of Income Statements A B A-B (A-B)/B*100 Percentage Increasel change over 2019 2018 Decrease 2018 Sales S201,500 S 181,500 $ 20,000 11% Cost of goods sold $ 143,200 $ 121,200 $ 22,000 18% Selling Expenses $ 20,300 $ 18,300 $ 2,000 11% Administrative Expenses $ 12,600 $ 14,600 $ (2,000) -14% Interest Expense $ 3,100 $ 5,100 $ (2,000 -39% Total Expenses $179,200 $ 159,200 $ 20,000 13% Income before taxes $ 22,300 $ 22,300 $ 0% Income tax Expenses $ 5,900 $ 3,200 $ 2,700 84% Net Income S 16,400 $ 19,100 $ (2,700)| -14% Vertical Analysis formula = Income Statemet item/Sales *100 Percentage of sales 2018 100% 67% Sales Cost of goods sold Selling Expenses Administrative Expenses Interest Expense Total Expenses Income before taxes Income tax Expenses Net Income CAMPBELL COMPANY Vertical Analysis of Income Statements Percentage of sales 2019 2019 S201,500 100% $ 143,200 71% $ 20,300 10% $ 12,600 6% $ 3,100 2% $179,200 89% $ 22,300 11% $ 5,900 3% S 16,400 8% 2018 S181,500 $ 121,200 $ 18,300 $ 14,600 $ 5,100 $159,200 $ 22,300 $ 3,200 $ 19,100 10% 8% 3% 88% 12% 2% 11%