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Question

# Prepare a horizontal analysis of the comparative income statements of McMahon Music Co. Round percentage changes to the nearest one-tenth percent (three decimal places). McMahon Music Co. Comparative Income Statements Years Ended December 31, 2012 and 2011$\begin{matrix} & \text{2012} & \text{2011}\\ \text{Total revenue } & \text{\1,077,000} & \text{\917,000}\\ \text{Expenses: }\\ \text{Cost of goods sold } & \text{\477,000 } & \text{\408,750 }\\ \text{Selling and general expenses} & \text{287,000 } & \text{265,000 }\\ \text{Interest expense} & \text{23,500 } & \text{13,500 }\\ \text{Income tax expense } & \text{105,500 } & \text{84,650 }\\ \text{Total expenses } & \text{893,000 } & \text{771,900 }\\ \text{Net income } & \text{\184,000} & \text{\145,100}\\ \end{matrix}$

Solution

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1. In the books of McMahon Music Co. Horizontal analysis of the comparative income statements Years Ended December 31, 2012 and 2011

Particulars 2012 ($) (a) 2011 ($) (b) Change (\$) (c) % (three decimal places) (c * 100 / b)
Total revenue 1,077,000 917,000 160,000 17.448
Expenses:
Cost of goods sold 477,000 408,750 68,250 16.696
Selling and general expenses 287,000 265,000 22,000 8.301
Interest expense 23,500 13,500 10,000 74.075
Income tax expense 105,500 84,650 20,850 24.630
Total expenses 893,000 771,900 121,100 15.688
Net income 184,000 145,100 38,900 26.810

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