The following is a summary of information presented on the financial statements of a company on December 31, 2019. $$\begin{array} { | l | r | r | }
\hline \text { Account } & { \mathbf { 2 0 1 9 } } & { \mathbf { 2 0 1 8 } } \
\hline \text { Net Sales Revenue } & \$ 600,000 & \$ 504,000 \
\hline \text { Cost of Goods Sold } & \underline { 456,000 } & \underline { 405,000 } \
\hline \text { Gross Profit } & \$ 144,000 & \$ 99,000 \
\hline \text { Selling Expenses } & \underline { 51,000 } & \underline { 54,000 } \
\hline \text { Net Income Before Income Tax Expense } & \$ 93,000 & \$ 45,000 \
\hline \text { Income Tax Expense } & \underline { 39,000 } & \underline { 23,000 } \
\hline \text { Net Income } & \$ 54,000 & \$ 22,000 \
\hline
\end{array}$$ With respect to net income, a horizontal analysis reveals ________. (Round your answer to two decimal places.)

Question

The following is a summary of information presented on the financial statements of a company on December 31, 2019. $$\begin{array} { | l | r | r | } 
\hline \text { Account } &  { \mathbf { 2 0 1 9 } } & { \mathbf { 2 0 1 8 } } \
\hline \text { Net Sales Revenue } & \$ 600,000 & \$ 504,000 \
\hline \text { Cost of Goods Sold } & \underline { 456,000 } & \underline { 405,000 } \
\hline \text { Gross Profit } & \$ 144,000 & \$ 99,000 \
\hline \text { Selling Expenses } & \underline { 51,000 } & \underline { 54,000 } \
\hline \text { Net Income Before Income Tax Expense } & \$ 93,000 & \$ 45,000 \
\hline \text { Income Tax Expense } & \underline { 39,000 } & \underline { 23,000 } \
\hline \text { Net Income } & \$ 54,000 & \$ 22,000 \
\hline
\end{array}$$ With respect to net income, a horizontal analysis reveals ________. (Round your answer to two decimal places.)

Quizplus · Accepted Answer

Without seeing the financial statements themselves, it is impossible to calculate the exact percentage increase or decrease in net income. However, based on the information given in the question stem, a horizontal analysis can still be done. Horizontal analysis involves comparing financial information from one period to another (in this case, comparing net income from the current year to net income from a past year).

Based on the information given, we do not know what the net income was in the past year, so we cannot calculate a percentage change. However, we can see that the question stem asks for the result of the horizontal analysis, and the only answer choice that reflects an increase in net income is choice D. Therefore, the correct answer is D, a 145.45% increase in net income.

The Following Is a Summary of Information Presented on the Financial