Prepare a horizontal analysis of the income statement data f

Prepare a horizontal analysis of the income statement data for Monty Corp., using 2016 as a base.

Increase or (Decrease) During 2017

2017

2016

Amount

Percentage

Net sales

$628,300

$531,300

%

Cost of goods sold

456,400

409,900

%

Gross Profit

171,900

121,400

%

Operating expenses

71,400

41,100

%

Net income

$ 100,500

$ 80,300

Prepare a vertical analysis of the income statement data for Monty Corp. for both years.

2017

2016

$

Percent

$

Percent

Net sales

$628,300

%

$531,300

%

Cost of goods sold

456,400

%

409,900

%

Gross Profit

171,900

%

121,400

%

Operating expenses

71,400

%

41,100

%

Net income

$ 100,500

%

$ 80,300

%

MONTY CORP. Comparative Income Statement December 31For the Years Ended December 31For the Month Ended December 31EAT_1438687245976_1_2705563206787363
					Increase or (Decrease) During 2017
	2017		2016		Amount		Percentage
Net sales	$628,300		$531,300		$			%
Cost of goods sold	456,400		409,900					%
Gross Profit	171,900		121,400					%
Operating expenses	71,400		41,100					%
Net income	$ 100,500		$ 80,300		$

Solution

Part 1

Horizontal analysis is a financial analysis technique that shows changes in the amount of corresponding financial staements over a period of time. It useful for trend analysis.Statement of two or more period can be used in horizontal analysis. The earliest period will be taken as base year and all later period are compared with items on the statement of base period.

The amount will be given as Increase or (Decrease) in data when compared to previous year 2016.

Percentage Column is rounded of upto two decimal places

The formula to calulate percentage change is Change/ Base. As per the solution the base year will be previous year in our example 2016. So change is increase or decrease in amount while comparing from previous year.

Part 2

A vertical analysis is used to show the the relative sizes of the different accounts on a financial statement.

For example, when a vertical analysis is done on an income statement, it will show the top line sales number as 100% and every other account will show as a percentage of the total sales number.

Hope it will help.

Particulars	2017	2016	Amount	Percentage
Net Sales	$628,300	$531,300	$97,000	18.26%
Cost of Goods Sold	$456,400	$409,900	$46,500	11.34%
Gross Profit	$171,900	$121,400	$50,500	41.60%
Operating expenses	$71,400	$41,100	$30,300	73.72%
Net Income	$100,500	$80,300	$20,200	25.15%