Module 4 Textbook Problem 1 Learning Objective: 4-1 Differentiate between horizontal and vertical analysis Income statements for Gibson Company for Year 3 and Year 4 follow: GIBSON COMPANY Income Statements Sales Year 4 $200,800 Year 3 $180,800 Cost of goods sold 142,700 120,700 Selling expenses 20,900 18,900 Administrative expenses 12,800 14,800 Interest expense 3,900 5,900 Total expenses $180,300 $160,300 Income before taxes Income taxes expense Net income 20,500 6,300 20,500 3,800 $ 14,200 $ 16,700 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. Complete this question by entering your answers in the tabs below. 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).) GIBSON 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 % % Problem: Module 4 Textbook Problem 1 Learning Objective: 4-1 Differentiate between horizontal and vertical analysis Income statements for Gibson Company for Year 3 and Year 4 follow: Sales Cost of goods sold Selling expenses GIBSON COMPANY Income Statements Year 4 $200,800 Year 3 $180,800 142,700 120,700 20,900 18,900 12,800 14,800 3,900 5,900 $180,300 $160,300 20,500 6,300 20,500 3,800 $ 14,200 $ 16,700 Administrative expenses Interest expense Total expenses Income before taxes Income taxes expense Net income 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. Complete this question by entering your answers in the tabs below. 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 GIBSON 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 Sales Year 4 Percentage of Sales Year 3 % % % %