Income statements for Solomon Company for 2018 and 2019 follow: SOLOMON COMPANY Income Statements 2019 2018 Sales $ 200,600 $ 180,600 Cost of goods sold 143,900 121,900 Selling expenses 21,500 19,500 Administrative expenses 12,300 14,300 Interest expense 3,800 5,800 Total expenses $ 181,500 $ 161,500 Income before taxes 19,100 19,100 Income taxes expense 6,200 3,100 Net income $ 12,900 $ 16,000 Required Perform a horizontal analysis, showing the percentage change in each income statement component between 2018 and 2019. Perform a vertical analysis, showing each income statement component as a percentage of sales for each year.

Explanation:

In vertical analysis , each item of the income statement is shown as a percentage of sales , while in horizontal analysis , the percentage growth in each item of the income statement from 2018 -2019 is calculated.

Horizontal Analysis

Particulars            2018                2019           % Change

Sales                    180,600           200,600           11.07

Cost of goods     121,900           143,900             18.04

Gross profit          58,700             56,700              (3.4)    

Selling Exp            19,500             21,500            10.26    

Admin Exp             14,300            12,300            (13.97)

Int. Exp                   5800                3,800            (34.48)

Total Exp.               161,500           181,500            12.38

PBT                          19,100               19,100               0

Income tax               3,100                6,200             100

Net Income              16,000             12,900           (19.38)

Vertical Analysis.

Particulars          2019         %          2018        %

Sales                  200,600    100     180,600    100

Cost of Goods   143,900   71.74     121,900   67.50

Gross profit         56,700    28.27    58,700  32.50

Selling Exp.         21,500      10.72    19,500    10.80

Admin Exp.          12,300       6.13      14,300    7.92

Interest Exp          3,800       1.89       5,800     3.21

Total Exp              181,500   90.48    161,500    89.42

PBT                        19,100      9.52      19,100    10.58

Income tax             6,200      3.09       3,100     1.71

Net Income            12,900    6.43        16,000  8.86

the answer would be voluntary exchange -

"the act of buyers and sellers freely and willingly engaging in market transactions. moreover, transactions are made in such a way that both the buyer and the seller are better off after the exchange than before it occurred."

hope this : )

-shy