Question

HAROUN COMPANY Comparative Income Statements For Years Ended December 31, 2021–2015 ($ thousands) 2021 2020 2019 2018 2017 2016 2015 Sales $ 2,622 $ 2,296 $ 2,089 $ 1,915 $ 1,787 $ 1,662 $ 1,362 Cost of goods sold 1,884 1,532 1,318 1,154 1,072 1,003 799 Gross profit 738 764 771 761 715 659 563 Operating expenses 560 438 402 297 257 254 211 Net income $ 178 $ 326 $ 369 $ 464 $ 458 $ 405 $ 352 HAROUN COMPANY Comparative Year-End Balance Sheets December 31, 2021–2015 ($ thousands) 2021 2020 2019 2018 2017 2016

Complete the below table to calculate the trend percents for all components of both statements using 2015 as the base year.
Refer to the results from part 1. (a) Did sales grow steadily over this period? (b) Did net income as a percent of sales grow over the past four years? (c) Did inventory increase over this period?

Answer 1

The trend percentages for sales and net income can be calculated using 2015 as the base year, revealing that sales grew steadily while net income as a percent of sales actually decreased in the later years. Full trend analysis requires calculations for each year, and additional inventory data from the balance sheet would be necessary to answer the inventory question.

Step-by-step explanation:

To calculate the trend percentages, we will use 2015 as the base year and compare each subsequent year's figures to it. The formula is Trend Percentage = (Analysis Year Amount / Base Year Amount) * 100%. Now, applying this to the data from the income statement and balance sheet, we'll determine the trends for sales, net income, and the balance sheet component of inventory:

• Sales Trend 2021 = (2,622 / 1,362) * 100% = 192.51%
• Net Income Trend 2021 = (178 / 352) * 100% = 50.57%
• Operating Expenses Trend 2021 = (560 / 211) * 100% = 265.40%

Using these calculations for each respective year, you will fill out the trend analysis for the entire period. Concerning your questions:

1. (a) Looking at the sales trend percentages year over year, sales increased steadily over the period from 1362 to 2622 ($ thousands).
2. (b) To see if net income as a percent of sales grew, you need to calculate the net income ratio for each year and compare the trends. As indicated by the net income trend, the percentage has actually decreased over the past four years, going from a trend percentage of over 100% in 2015 to 50.57% in 2021.
3. (c) To assess whether inventory increased, you would need the inventory figures from the balance sheet for each respective year, which have not been provided.

The inventory question cannot be answered without additional data.

Answer 2

Sales at Haroun Company increased steadily from 2015 to 2021. Net income as a percent of sales showed fluctuations, not a consistent growth. Inventory data is missing to assess if there was an increase over the period.

Step-by-step explanation:

The student's question involves calculating trend percents for various components of Haroun Company's income statements and balance sheets, using 2015 as the base year. This entails understanding how sales, net income, and inventory levels have changed over time relative to 2015.

An example of how to calculate the trend percent is as follows: If the sales in 2015 were $1,362,000 and in 2021 were $2,622,000, the trend percent for sales in 2021 would be ($2,622,000 / $1,362,000) * 100 = 192.51%. This represents a 92.51% increase from the base year of 2015.

To answer the questions provided: (a) Sales did grow steadily over the period, indicated by the increasing sales figures from 2015 to 2021. (b) Net income as a percent of sales did not grow consistently over the past four years, as evidenced by fluctuations in net income. (c) Without inventory data, it's not possible to answer if inventory increased over the period.