Answer to Question #167413 in Accounting for Jichang

Question

Problem 1.    

Foxtail Hotel

Comparative Statement of Comprehensive Income

Years Ended December 31, 2019 and 2020

 

 

2019

 

2020

Total Revenue

P  410,000

 

P  373,000

Expenses:

 

 

 

    Cost of goods sold

202,000

 

188,000

    Selling and general expenses

98,000

 

93,000

    Interest expenses

7,000

 

4,000

    Income tax expenses

42,000

 

37,000

Total Expenses

P  349,000

 

P   322,000

Net Income

P    61,000

 

P     51,000

    

Requirements:

1.  Prepare a horizontal analysis. Round percentage changes to the nearest one-tenth percent (three decimal places).

2.  Why did net income decrease by a higher percentage than total revenues decreased during 2020?

Answer 1

1.).

2.). The net income decreased by a higher percentage compared to total revenue because the total revenue figure reduced by a bigger margin compared to total expenses.