Answer:
FEDERER SPORTS APPAREL
Income Statement For the Years Ended December 31
Years Increase /(Decrease)
2019 2018 Amount %
Net sales 18,800,000 15,500,000 3,300,000 21.29%
Cost of goods sold 13,200,000 7,000,000 6,200,000 88.57%
Gross profit 5,600,000 8,500,000 (2,900,000) -34.12%
Operating expenses 1,600,000 1,200,000 400,000 33.33%
Depreciation expense 1,000,000 1,000,000 0 0
Inventory write-down 200,000 0 200,000 100%
Loss (litigation) 1,500,000 300,000 1,200,000 400%
Net Income $1,300,000 $6,000,000 (4,700,000) 78.33%
Explanation:
a) Federer Sports Apparel can use horizontal analysis as a technique for analyzing the financial statement changes over a period of time. It is a useful tool for Federer to evaluate its trend situations, using the financial statements of two years with the earlier year serving as the base year (or independent variable) while the latter year is the dependent variable.
