Comparative Financial Statements for Cross, Inc Which One of the Following Is Revealed by Horizontal Analysis

question 10

Multiple Choice

Comparative financial statements for Cross, Inc.are shown below: $\begin{array}{lrrr}&\text { December } 31\\&2018&2017\\\text { Assets }\\\text { Current assets: }\\\text { Cash } & \$ 89,103 & \$ 68,203 \\\text { Accounts receivable } & 142,000 & 135,000 \\\text { Inventory } & 96,708 & 85,694 \\\text { Prepaid expenses } & 21,203 & 5,118 \\\text { Total current assets } & 349,014 & 294,015 \\\text { Property, plant and equipment, net } & 822,576 & \mathbf{7 1 8 , 1 4 4} \\\text { Total assets } & \$ 1.171 .590 & \$ 1012,159 \\\text { Liabilities and Stockholders' Equity }\\\text { Current liabilities: }\\\text { Accounts payable } & \$ \quad 85,443 & \$ 62,394 \\\text { Other current liabilities } & 38,112 & 33,507 \\ \text { Total current liabilities } & 123,555 & 95,901 \\\text { Long-term debt } & 302,430 & 290,324 \\\text { Total liabilities } & 425,985 & 386,225\\\text { Stockholders' equity: }\\\text { Common stock } & 600,000 & 600,000 \\\text { Retained earnings } & 145,605 & 25,934 \\\text { Retained earnings } & 14,700 & 8,000 \\\text { Total stockholders' equity }&745,605&625,934 \\\text { Total liabilities and stockholders' equity } &\$1,171,590&\$1,012,159\\\\&\text { Year Ended December } 31\\&2018&2017\\\text { Net sales } & \$ 17,005,852 & \$ 13,809,585 \\\text { Cost of goods sold } & 12,250,257 & 9,825,614 \\\text { Gross margin } & 4,755,595 & 3,983,971 \\\text { Operating expense } & 3,585,657 & 3,400,258\\\text { Operating income } & 1,169,938 & 583,713 \\\text { Interest expense } & 28,500 & 27,300 \\\text { Earnings before tax } & 1,141,438 & 556,413 \\\text { Income taxes } & 342,431 & 166,924\\\text { Net income }&\$799,007&\$389,489\end{array}$ Which one of the following is revealed by horizontal analysis of Cross, Inc.during the 2018 and 2017 years?

• A)Current assets are increasing at a faster rate than total assets.
• B)Sales are increasing faster than cost of goods sold.
• C)Sales are increasing faster than net income.
• D)Cash is increasing faster than accounts payable.

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Definitions:

Independent Contractor

An individual or entity contracted to perform work for another entity as a non-employee, having control over how the work is completed.

Employee

An individual who works part-time or full-time under a contract of employment, typically earning a salary or wage.

Customary Compensation

Payment or remuneration that is considered standard or usual for a particular job or service within a specific industry or community.

Timely Manner

Completing tasks or fulfilling obligations within the expected or agreed timeframe.