CHAPTER 14 PART 2

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Vertical Analysis of Income Statement For 2012, Fielder Industries Inc. initiated a sales promotion campaign that included the expenditure of an additional $40,000 for advertising. At the end of the year, Leif Grando, the president, is presented with the following condensed comparative income statement: Fielder Industries Inc. Comparative Income Statement For the Years Ended December 31, 20Y2 and 20Y1 20Y2 Sales $1,300,000 (682,500) 20Y1 $1,180,000 (613,600) Cost of goods sold Gross profit $617,500 $566,400 Selling expenses $(188,800) $(260,000) (169,000) Administrative expenses (177,000) Total operating expenses $(429,000) $(365,800) Operating income $188,500 $200,600 Other revenue 78,000 70,800 Income before income tax expense $266,500 $271,400 Income tax expense (117,000) (106,200) Net income $149,500 $165,200 Required: 1. Prepare a comparative income statement for the two-year period, presenting an analysis of each item in relationship to sales for each of the years. Round to one decimal place. For those boxes in which you must enter subtracted or negative numbers use a minus sign. Fielder Industries Inc. Comparative Income Statement For the Years Ended December 31, 20Y2 and 20Y1 20Y2 20Y2 20Y1 Amount Percent Amount $1,300,000 / 100% $1,180,000/ (682,500) 52.50 % X (613,600) 20Y1 Percent 100 % Sales Cost of goods sold 52 % Gross profit $617,500 Selling expenses $(260,000) (169,000) $566,400 (188,800) (177,000) $(365,800) Administrative expenses Total operating expenses $(429,000) Operating income $188,500 $200,600 Other revenue 78,000 70,800 Income before income tax expense $266,500 $271,400 Income tax expense (117,000) (106,200) Net income $149,500 $165,200