Question

HAROUN COMPANY
Comparative Income Statements
For Years Ended December 31, 2019–2013
($ thousands)	2019			2018			2017			2016			2015			2014			2013
Sales	$	2,778		$	2,433		$	2,214		$	2,029		$	1,893		$	1,760		$	1,443
Cost of goods sold		1,997			1,625			1,398			1,223			1,137			1,063			847
Gross profit		781			808			816			806			756			697			596
Operating expenses		595			465			427			315			273			269			224
Net income	$	186		$	343		$	389		$	491		$	483		$	428		$	372

HAROUN COMPANY
Comparative Balance Sheets
December 31, 2019–2013
($ thousands)	2019			2018			2017			2016			2015			2014			2013
Assets
Cash	$	160		$	211		$	219		$	224		$	232		$	229		$	237
Accounts receivable, net		1,146			1,204			1,090			836			736			697			492
Merchandise inventory		4,147			3,019			2,638			2,223			1,997			1,696			1,230
Other current assets		106			96			59			106			89			91			47
Long-term investments		0			0			0			327			327			327			327
Plant assets, net		5,075			5,055			4,422			2,493			2,579			2,292			1,967
Total assets	$	10,634		$	9,585		$	8,428		$	6,209		$	5,960		$	5,332		$	4,300
Liabilities and Equity
Current liabilities	$	2,673		$	2,247		$	1,475		$	1,227		$	1,064		$	1,007		$	649
Long-term liabilities		2,857			2,488			2,421			1,124			1,149			1,244			933
Common stock		1,935			1,935			1,935			1,720			1,720			1,505			1,505
Other paid-in capital		484			484			484			430			430			376			376
Retained earnings		2,685			2,431			2,113			1,708			1,597			1,200			837
Total liabilities and equity	$	10,634		$	9,585		$	8,428		$	6,209		$	5,960		$	5,332		$	4,300

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? (c) Did inventory increase over this period?
Complete the below table to calculate the trend percents for all components of comparative income statements using 2013 as the base year. (Round your percentage answers to 1 decimal place.)

	HAROUN COMPANY Income Statement Trends For Years Ended December 31, 2019–2013 2019 2018 2017 2016 2015 2014 2013 Sales % % % % % % 100.0 % Cost of goods sold 100.0 Gross profit 100.0 Operating expenses 100.0 Net income % % % % % % 100.0 %

Answer 1

	2019	2018	2017	2016	2015	2014	2013
Sales	193%	169%	153%	141%	131%	122%	100%
Cost of goods sold	236%	192%	165%	144%	134%	126%	100%
Gross Profit	131%	136%	137%	135%	127%	117%	100%
Operating Expenses	266%	208%	191%	141%	122%	120%	100%
Net Income	50%	92%	105%	132%	130%	115%	100%

Here is the formula version

C D E F G H I 2019 =C2-1 =D2-1 =E2-1 =F2-1 =G2-1 =H2-1 1625 Sales 2778 COGS 1997 GP =C4-C5 Operating Expenses 595 Net Income =C6-C7 2433 2214 1398 =D4-D5 =E4-E5 465 427 =D6-D7 =E6-E7 2029 1223 =F4-F5 315 =F6-F7 1893 1137 =G4-G5 2 73 =G6-67 1760 1443 1063 847 =H4-H5 =14-15 269 224 =H6-H7 =16-17 2019 2018 2017 2016 2015 2014 2013 Sales =C4/$I$4 =D4/$1$4 =E4/$I$4 =F4/$1$4 =G4/$1$4 =H4/$1$4 =14/$1$4 Cost of goods sold =C5/$I$5 =D5/$I$5 =E5/$I$5 =F5/$I$5 =G5/$I$5 =H5/$I$5 =15/$I$5 Gross Profit =C6/$I$6 =D6/$1$6 =E6/$1$6 =F6/$I$6 =G6/$I$6 =H6/$1$6 =16/$1$6 Operating Expenses =C7/$i$7 =D7/$1$7 =E7/$I$7 =F7/$i$7 =G7/$i$7 =H7/$i$7 =17/$i$7 Net Income =C8/$1$8 =D8/$I$8 =E8/$I$8 =F8/$1$8 =G8/$I$8 =H8/$I$8 =18/$I$8

2.

a) Yes, there is a consistent growth in sales over the period. The growth was 22% in 2014, then there was further growth in the following years to the point where it grew to almost double in 2019.

b)

NI as a percent of sales

7%

14%

18%

24%

26%

24%

26%

No, net income as a percent of sales did not show growth. It was on a decline.

c)

Yes, as can be seen from the Balance Sheet, ending inventory consistently increased over the period in question.