Sunshine Farm Supply
Following are selected data from the financial statements of Sunshine Farm Supply:
-Refer to the data for Sunshine Farm Supply.
Which of the following would result from a horizontal analysis of its income statement?
A)Cost of goods sold is 45.5% of net sales for 2016.
B)Gross profit is 42.1% of net sales for 2016.
C)Cost of goods sold decreased $50,000 or 23.8% during 2016.
D)Accounts receivable total 13.3% of total assets for 2016.

Question

Sunshine Farm Supply
Following are selected data from the financial statements of Sunshine Farm Supply: 
-Refer to the data for Sunshine Farm Supply.
Which of the following would result from a horizontal analysis of its income statement?
A)Cost of goods sold is 45.5% of net sales for 2016. 
B)Gross profit is 42.1% of net sales for 2016. 
C)Cost of goods sold decreased $50,000 or 23.8% during 2016. 
D)Accounts receivable total 13.3% of total assets for 2016.

Quizplus · Accepted Answer

Horizontal analysis compares financial statement items from year to year to determine the overall increase or decrease. Therefore, Choice C (Cost of goods sold decreased $50,000 or 23.8% during 2016) would result from a horizontal analysis of the income statement as it compares the cost of goods sold from 2015 to 2016. The other choices do not pertain to an analysis of changes from one year to the next.

Sunshine Farm Supply Following Are Selected Data from the Financial Statements of Sunshine