Income statements for Rundle Company for Year 3 and Year 4 follow:
RUNDLE COMPANY
Income Statements
Year 4 Year 3
Sales $ 201,000 $ 181,000 Cost of goods sold 143,300 121,300 Selling expenses 20,600 18,600 Administrative expenses 12,200 14,200 Interest expense 3,100 5,100 Total expenses $ 179,200 $ 159,200 Income before taxes 21,800 21,800 Income taxes expense 5,400 3,500 Net income $ 16,400 $ 18,300 Required
a. Perform a horizontal analysis, showing the percentage change in each income statement component between Year 3 and Year 4.
b. Perform a vertical analysis, showing each income statement component as a percentage of sales for each year.
b.
RUNDLE COMPANY
Vertical Analysis of Income Statements
Percentage of Sales Year 4 Percentage of Sales Year 3
Sales % %
Cost of goods sold Selling expenses Administrative expenses Interest expense Total expenses Income before taxes Income taxes expense Net income % %
a.
RUNDLE COMPANY
Horizontal Analysis of Income Statements
Percentage Change over Year 3
Sales %
Cost of goods sold Selling expenses Administrative expenses Interest expense Total expenses Income before taxes Income taxes expense Net income (loss) %