E9-5 - 36,000 22.5 Costs of goods sold 170,100 140,000...

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Income statement data for Grendel Images Company for the years ended December 31, 2010 and 2009, are as follows: 2010 2009 Sales $196,000 $160,000 Cost of goods sold 170,100 140,000 Gross profit $ 25,900 $ 20,000 Selling expenses $ 12,200 $ 10,000 Administrative expenses 9,750 8,000 Total operating expenses $ 21,950 $ 18,000 Income before income tax $ 3,950 $ 2,000 Income tax expense 2,000 1,000 Net income $ 1,950 $ 1,000 a. Prepare a comparative income statement with horizontal analysis, indicating the increase (decrease) for 2010 when compared with 2009. Round to one decimal place. b. What conclusions can be drawn from the horizontal analysis? Solution: a) Comparative Income Statement 2010 2009 Increase Or Decrease Percent Sales $196,000 $160,000
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Unformatted text preview: 36,000 22.5% Costs of goods sold 170,100 140,000 30,100 21.5 Gross Profit 25,900 20,000 5,900 29.5 Selling expenses 12,200 10,000 2,200 22 Administrative expenses 9,750 8000 1,750 21.9 Total operating expenses 21,950 18,000 3950 21.9 Income before income tax 3,950 2000 1950 97.5 Income tax expense 2000 1000 1000 100 Net Income 1,950 1000 950 95 b) The net income for Grendel Images Company increased by approximately 95% from 2009 to 2010. The reason for the increase was the combined result of an increase in sales of 22.5% and lower expenses. The cost of goods sold increased at a rate slower than the increase in sales, therefore causing gross profit to increase more than the increase in sales....
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This note was uploaded on 04/11/2011 for the course ACC 305 taught by Professor Allison during the Spring '11 term at Western Intl..

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