Here are the comparative income statements of Georgia Development Corporation. GEORGIA DEVELOPMENT CORPORATION Condensed Income Statements For the Years Ended December 31 December 31, 2017 December 31, 2016 Net sales $600,000 $500,000 Cost of goods sold 414,000 350,000 Gross profit 186,000 150,000 Operating expenses 150,000 120,000 Net income $36,000 $30,000 Prepare a horizontal analysis of the income statement data for Georgia Development Corporation using 2016 as a base. (If amount and percentage are a decrease show the numbers as negative, e. g. -55,000, -12.1% or (55,000), (12.1%). Round percentages to 1 decimal place, e. g. 12.1%.)

There is an increase in the CGS if calculated based on 2016 figures which gives a reduced gross profit by 1% . But the operating expenses are also decreased by 1% which gives decreased Net income by 1% which is the same as the original income.

Explanation:

GEORGIA DEVELOPMENT CORPORATION

Condensed Income Statements  (Calculations for Base)

For the Years Ended

                             December 31, 2016     December 31, 2017   As Base

Net sales                        $500,000             $600,000             $600,000

Cost of goods sold         350,000                  414,000             420,000

Gross profit                      150,000                 186,000             180,000

Operating expenses          120,000              150,000              144,000

Net income                        $30,000                $36,000           $ 36,000

We calculate each amount based to  2016

CGS 2017= (CGS/ 2016 Sales)* 2017 Sales= 350,000/500,000) 600,000= $ 420,000

Operating expenses 2017= (Operating expenses 2016/ 2016 Sales)* 2017 Sales= 120,000/500,000) 600,000= $ 144,000

GEORGIA DEVELOPMENT CORPORATION

Condensed Income Statements Horizontal Analysis (figures)

For the Years Ended

                                 December 31, 2017       2016 As Base     Difference

Net sales                                $600,000             $600,000         -

Cost of goods sold                       414,000             420,000        6,000

Gross profit                                    186,000             180,000       (6000)

Operating expenses                     150,000              144,000        6000

Net income                                      $36,000           $ 36,000        NIL

GEORGIA DEVELOPMENT CORPORATION

Condensed Income Statements  Horizontal Analysis (Percentages)

For the Years Ended

                                 December 31, 2017       2016 As Base    % Difference

Net sales                                $600,000             $600,000         -

Cost of goods sold                       414,000             420,000         1%

Gross profit                                    186,000             180,000       ( 1%)

Operating expenses                     150,000              144,000          1%

Net income                                      $36,000           $ 36,000        NIL

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