The following is summary of information presented on the financial statements of a company on December 31, 2015. What would a horizontal analysis report show with respect to long-term liabilities?
A)long-term liabilities decreased by $30,000
B)long-term liabilities decreased by 40%
C)long-term liabilities decreased by 13.33%
D)long-term liabilities decreased by $10,000

Question

The following is summary of information presented on the financial statements of a company on December 31, 2015.  What would a horizontal analysis report show with respect to long-term liabilities?
A)long-term liabilities decreased by $30,000 
B)long-term liabilities decreased by 40% 
C)long-term liabilities decreased by 13.33% 
D)long-term liabilities decreased by $10,000

Quizplus · Accepted Answer

A horizontal analysis compares the financial statement items over a period of time. To determine the change in long-term liabilities, we need to compare the long-term liability account from the previous year to the current year. As no previous year data is given in the question, we cannot determine the actual dollar amount of change. However, we can calculate the percentage change by using the formula: (Current year amount - Previous year amount) / Previous year amount. Using the amounts given in the financial statement, we can calculate a decrease of 13.33% in long-term liabilities. Therefore, the answer is (C) long-term liabilities decreased by 13.33%.

The Following Is Summary of Information Presented on the Financial