4. The following is summary of information presented on the financial statements

Question

4. The following is summary of information presented on the financial statements of a company on December 31, 2015. Account 2015 2014 Net Sales Revenue $600,000 $500,000 Cost of Goods Sold 450,000 400,000 Gross Profit $150,000 $100,000 Selling Expenses 50,000 50,000 Net income before income tax expense $100,000 $50,000 Income tax expense 35,000 18,000 Net Income $65,000 $32,000 What would a horizontal analysis report show with respect to net sales revenue? a. a 20% increase in net sales revenue b. a 120% decrease in net sales revenue c. a decrease of $ 50,000 in net sales revenue d. an increase of $50,000 in net sales revenue

Explanation / Answer

a)net sales revenue increased by (600,000-500,000)/500,000=20% so a) is correct

b)is incorrect,c)there is infact 100,000 increase in net sales revenue so c and d is incorrect

Thus only choice a is correct.

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