Question

($ thousands) Sales Cost of goods sold Gross profit Operating expenses Net income HAROUN COMPANY Comparative Income Statements For Years Ended December 31, 2019-2013 2019 2018 2017 2016 2015 2014 2013 $1,536 $1,345 $1,224 $1,122 $1,047 $ 974 $ 798 1,104 898 772 676 628 587 468 432 447 452 446419 387 330 329 258 236 174 151 149 124 $ 103 $ 189 $ 216 $ 272 $ 268 $ 238 $ 206 HAROUN COMPANY Comparative Balance Sheets December 31, 2019-2013 2019 2018 2017 2016 2015 2014 2013 $ 143 2 97 744 ($ thousands) Assets Cash Accounts receivable, net Merchandise inventory Other current assets Long-term investments Plant assets, net Total assets Liabilities and Equity Current liabilities Long-term liabilities Common stock Other paid-in capital Retained earnings Total liabilities and equity $ 96 693 2,508 64 0 3,069 $6,430 $ 127 728 1,825 58 0 3,057 $5,795 $ 132 $ 135 659 505 1,5951,344 36 64 0 198 2,674 1,508 $5,096 $3,754 $ 141 445 1,207 54 198 1,559 $3,604 $ 139 422 1,025 55 198 1,385 $3,224 29 198 1,189 $2,600 $1,618 1,727 1,170 293 1,622 $6,430 $1,361 1.504 1,170 293 1,467 $5,795 $ 893 1.464 1,170 293 1,276 $5,096 $ 743 6 80 1,040 260 1,031 $3,754 $ 645 694 1,040 260 965 $3,604 $ 610 752 910 228 724 $3,224 $ 393 564 910 228 505 $2,600 Required: 1. Complete the below table to calculate the trend percents for all components of both statements using 2013 as the base year. 2. Refer to the results from part 1. (a) Did sales grow steadily over this period? (b) Did net income as a percent of sales grow over the past four years? (Did inventory increase over this period? HAROUN COMPANY Income Statement Trends For Years Ended December 31, 2019-2013 2018 2017 2016 2019 2015 2014 Sales 2013 100.0 % 100.0 Cost of goods sold Gross profit 100.0 Operating expenses 100.0 Net income 100.0 % HAROUN COMPANY Balance Sheet Trends December 31, 2019-2013 2017 2016 2019 2018 2015 2014 2013 Assets Cash Accounts receivable, net 100.0 % 100.0 100.0 Merchandise inventory Other current assets 100.0 100.0 Long-term investments Plant assets, net Total assets 100.0 100.0 % 100.0 % 100.0 Liabilities and Equity Current liabilities Long-term liabilities Common stock Other paid-in capital Retained earnings Total liabilities & equity 100.0 100.0 100.0 100.0 % %

Answer 1

Prepare income statement showing trend percentage in the manner given below: B C D E F G H H Company Income statement trends For years ended December 31, 2019-2013 2019 2018 2017 2016 2015 2014 2013 5 Sales 192.5% 168.5% 153.4% 140.6% 131.2% 122.1% 100.0% 6 Cost of goods sold 235.9% 191.9% 165.0% 144.4% 134.2% 125.4% 100.0% 7 Gross profit 130.9% 135.5% 137.0% 135.29 127.0% 117.3% 100.0% 8 Operating expenses 265.3% 208.10 190.3% 140.39 121.8% 120.2% 100.0% 9 Net income 50.0% 91.79 104.9 132.0% 130.1% 115.5% 100.0% Prepare the spreadsheet showing computation of trend of income statement, in the manner given below: A B C D E F G H H Company Income statement trends For years ended December 31, 2019-2013 2019 2018 2017 2016 2015 2014 2013 5 Sales =1536/798 =1345/798 |=1224/798 =1122/798 |=1047/798 |=974/798 |=798/798 6 Cost of goods sold =1104/468 =898/468 1=772/468 =676/468 =628/468 =587/468 =468/468 7 Gross profit 1=432/330 =447/330 =452/330 =446/330 =419/330 =387/330=330/330 8 Operating expenses =329/124 1=258/124 =236/124 =174/124 =151/124 =149/124 =124/124 9 Net income =103/206 =189/206 =216/206 =272/206 =268/206 =238/206 =206/206

Prepare the trend reflecting balance sheet for the period 2019-2013, in the manner given below: Cash B C D E F G H Company Balance sheet trends December 31, 2019-2013 2019 2018 2017 2016 2015 2014 2013 Assets 67.1% 88.8% 92.3% 94.4% 98.6% 97.2 100.0% 7 Accounts receivable, net |233.3% 245.1% 221.9% 170.0% 149.8% 142.1% 100.0% 8 Merchadise inventory 337.1% 245.3% 214.4% 180.6% 162.2% 137.8% 100.0% 9 Other current assets 220.7% 200.0% 124.19220.79 186.2% 189.79 100.0% 10 Long-term investments 0.0% 0.0% 0.0% 100.0% 100.0% 100.0% 100.0% 11 Plant assets, net 258.1% 257.1% 224.9% 126.8% 131.1% 116.5% 100.0% 12 Total assets 247.3% 222.9% 196.0% 144.4% 138.6% 124.0% 100.0% 13 Liabilities and equity 14 Current liabilities | 411.7% 346.3% 227.2% 189.1% 164.1% 155.2 100.0% 15 Long-term liabilites 306.2% 266.7%259.6% 120.6% 123.0% 133.3% 100.0% 16 Common stock 128.6% 128.6% 128.6% 114.3% 114.3% 100.0% 100.0% 17 Other paid-in capital 128.5% 128.5% 128.5% 114.0% 114.0% 100.0% 100.0% 18 Retained earnings 321.29 290.5%252.7%204.2% 191.1% 143.4% 100.0% 19 Total liabilities & equity 247.3% 222.9% 196.0% 144.4% 138.6% 124.0% 100.0%

Prepare the spreadsheet showing the calculation of amounts mentioned in trend reflecting balance sheet, in the manner given below: 1 H Company Balance sheet trends December 21 2010-2013 2017 2016 2019 2018 2015 2014 Assets Cash 7 Accounts receivable, net 8 Merchadise inventory 9 Other current assets 10 Long-term investments 11 Plant assets, net 12 Total assets 13 Liabilities and equity 14 Current liabilities 15 Long-term liabilites 16 Common stock 17 Other paid-in capital 18 Retained earnings 19 Total liabilities & equity =96/143 =127/143 1=132/143 =135/143 1=141/143 =139/143 1=143/143 =693/297 =728/297 =659/297 =505/2971-445/297 -422/297 1=297/297 1=2508/744 =1825/744 =1595/744 =1344/744 =1207/744 =1025/744 =744/744 =64/29 =58/29 =36/29 =64/29 =54/29 =55/29 =29/29 1=0/198 =0/1981=0/198 =198/1981=198/198 =198/1981-198/198 33069/1189=3057/1189 =2674/1189 =1508/1189 =1559/1189=1385/1189 =1189/1189 1=6430/2600135795/2600 =5096/260033754/2600133604/2600133224/2600 =2600/2600 =1618/393 =1361/393 5893/393 =743/393 1=645/393 =610/393 =393/393 =1727/564 =1504/564 =1464/564 5680/564 5694/564 =752/564 =564/564 =1170/910 =1170/910 =1170/910 =1040/910 =1040/910 =910/910 =910/910 =293/228 =293/228 1=293/228 =260/228 =260/228 =228/228 =228/228 1=1622/505 1=1467/505 =1276/505 =1031/505 =965/505 1=724/505 1=505/505 =6430/2600 =5795/2600 =5096/2600 -3754/2600 =3604/2600 3224/2600 =2600/2600 (a) Determine whether the sales grow steadily, in the manner given below: 2019 2018 2017 2016 2015 2014 2013 Sales 192.5% 168.5% 153.4% 140.6% 131,2% 122.1% 100.0% Thus, Over the period 2013 to 2019, sale grew by 92.5%.

(b) Prepare statement to show net income as percentage of sales, in the manner given below: (1) 2019 $103 $1,536 2018 2017 2016 $189 $216 $272 $1,345 $1,224 $1,122 Net income Sales Net income as percentage of sales (iii)=[(i):(ii)]* 100 6.7% 14.1% 17.6% 24.2% Thus, it is interpreted that net income as percentage of sales has not grown in past 4 years. (C) Prepare statement showing inventory as percentage of base year, in the manner given below: 2019 2018 2017 2016 2015 337.1% 245.3% 214.4% 180.6% 162. 2 2014 2013 137.8% 100.0% Merchadise inventory Thus, it is interpreted that inventory has increase by 237.1% from the base year.