Module 4 Textbook Problem 1 Learning Objective: 4-1 Differentiate between horizontal and vertical analysis Income statements for Rooney Company for Year 3 and Year 4 follow: ROONEY COMPANY Income Statements Sales Year 4 $201,200 Year 3 $181,200 Cost of goods sold 143,900 121,900 Selling expenses 21,100 19,100 Administrative expenses 12,500 14,500 Interest expense 3,900 5,900 Total expenses $181,400 $161,400 Income before taxes Income taxes expense Net income 19,800 6,200 19,800 3,300 $ 13,600 $ 16,500 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. Required A Required B Perform a horizontal analysis, showing the percentage change in each income statement component between Year 3 and Year 4. (Negative answers should be indicated by a minus sign. Round your percentage answers to 1 decimal place. (i.e., 0.234 should be entered as 23.4).) ROONEY COMPANY Horizontal Analysis of Income Statements Sales Cost of goods sold Selling expenses Administrative expenses Interest expense Total expenses Income before taxes Income taxes expense Net income (loss) Percentage Change over Year 3 % % Required A Required B > Required A Required B Perform a vertical analysis, showing each income statement component as a percentage of sales for each year. (Percentages may not add exactly due to rounding. Round your percentage answers to 1 decimal place. (i.e., 0.234 should be entered as 23.4).) Sales ROONEY COMPANY Vertical Analysis of Income Statements Cost of goods sold Selling expenses Administrative expenses Interest expense Total expenses Income before taxes Income taxes expense Net income Percentage of Percentage of Sales Year 4 Sales Year 3 % % %