Question

Instructions: Prepare a horizontal analysis of the income statement for Cookie & Coffee Creations Inc. using 2019 as a base year (which is a continuation of the Continuing Cookie Chronicle)

Note: Do not use the information presented on the Textbook website, it is different from what is required below. You may refer to the information within Chapter 13 (week 6) for assistance in completing this tab. COOKIE & COFFEE CREATIONS INC. Income Statement For the Year Ended October 31 Horizontal Analysis Difference 2020 $485,625 222,694 262,931 2019 $462,500 208,125 254,375 Sales Cost of goods sold Gross profit Operating expenses Salaries & wages expense Depreciation expense Other operating expenses Total operating expenses Income from operations Other expenses Interest expense Loss on sale of computer equipment Total other expenses Income before income tax Income tax expense Net income 147,979 17,600 48,186 213,765 49,166 146,350 9,100 42,925 198,375 56,000 413 2,5000 2,913 46,253 56,000 14,000 $37,002 $42,000 9,251

Answer 1

	Cookie and Coffee creations Inc.
		2020	2019	Difference	Horizontal Analysis
(a)		(a)	(b)	(c) = (a) - (b)	(b) / (c)
	Sales	$ 4,85,625	$ 4,62,500	$     23,125	5.00%
(b)	Cost of goods sold	$ 2,22,694	$ 2,08,125	$     14,569	7.00%
	Gross margin	$ 2,62,931	$ 2,54,375	$       8,556	3.36%
	Expenses
	Salaries and wages	$ 1,47,979	$ 1,46,350	$       1,629	1.11%
	Depreciation expense	$     17,600	$       9,100	$       8,500	93.41%
	Other operating expenses	$     48,186	$     42,925	$       5,261	12.26%
	Total operating expenses	$ 2,13,765	$ 1,98,375	$     15,390	7.76%
	Income from operations	$     49,166	$     56,000	$     -6,834	-12.20%
	Other expenses
	Interest expense	$           413	$              -	$           413	0.00%
	Loss on sale of computer equipment	$       2,500	$              -	$       2,500	0.00%
	Total other expenses	$       2,913	$              -	$       2,913	0.00%
	Income before income tax	$     46,253	$     56,000	$     -9,747	-17.41%
	Income tax expense	$       9,251	$     14,000	$     -4,749	-33.92%
	Net Income	$     37,002	$     42,000	$     -4,998	-11.90%
	Cookie and Coffee creations Inc.
		2020	Percent of Sales	2019	Percent of Sales
(a)		(a)	[(a) / $485625] X 100	(b)	[(b) / $462500] X 100
	Sales	$ 4,85,625	100.00%	$ 4,62,500	100.00%
(b)	Cost of goods sold	$ 2,22,694	45.86%	$ 2,08,125	45.00%
	Gross margin	$ 2,62,931	54.14%	$ 2,54,375	55.00%
	Expenses
	Salaries and wages	$ 1,47,979	30.47%	$ 1,46,350	31.64%
	Depreciation expense	$     17,600	3.62%	$       9,100	1.97%
	Other operating expenses	$     48,186	9.92%	$     42,925	9.28%
	Total operating expenses	$ 2,13,765	44.02%	$ 1,98,375	42.89%
	Income from operations	$     49,166	10.12%	$     56,000	12.11%
	Other expenses
	Interest expense	$           413	0.09%	$              -	0.00%
	Loss on sale of computer equipment	$       2,500	0.51%	$              -	0.00%
	Total other expenses	$       2,913	0.60%	$              -	0.00%
	Income before income tax	$     46,253	9.52%	$     56,000	12.11%
	Income tax expense	$       9,251	1.90%	$     14,000	3.03%
	Net Income	$     37,002	7.62%	$     42,000	9.08%