Selected data from the financial statements are provided below:

-Refer to Rags to Riches. Which of the following would result from a horizontal analysis of the company's income statement?
A)Cost of goods sold is 42.1% of net sales for 2020.
B)Gross profit is 57.9% of net sales for 2020.
C)Cost of goods sold decreased 23.8% from 2019 to 2020.
D)Inventory decreased $4,000 or 20% during 2019.

Question

Selected data from the financial statements are provided below:
 
-Refer to Rags to Riches. Which of the following would result from a horizontal analysis of the company's income statement?
A)Cost of goods sold is 42.1% of net sales for 2020. 
B)Gross profit is 57.9% of net sales for 2020. 
C)Cost of goods sold decreased 23.8% from 2019 to 2020. 
D)Inventory decreased $4,000 or 20% during 2019.

Quizplus · Accepted Answer

A horizontal analysis compares financial statement items over a period of time. Choice C indicates a percentage decrease in cost of goods sold from 2019 to 2020, making it the only option that aligns with a horizontal analysis of the income statement. Choices A, B, and D provide incomplete or incorrect information that does not relate to a horizontal analysis.

Selected Data from the Financial Statements Are Provided Below