chapter 16

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Vertical analysis of income statement

For 20Y2, 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

Line Item Description	20Y2	20Y1
Sales	$1,300,000	$1,180,000
Cost of goods sold	(682,500)	(613,600)
Gross profit	$617,500	$566,400
Selling expenses	$(260,000)	$(188,800)
Administrative expenses	(169,000)	(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:

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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

Line Item Description	20Y2 Amount	20Y2 Percent	20Y1 Amount	20Y1 Percent
Sales	$1,300,000	Sales%	$1,180,000	Sales%
Cost of goods sold	(682,500)	Cost of goods sold%	(613,600)	Cost of goods sold%
Gross profit	$617,500	Gross profit%	$566,400	Gross profit%
Selling expenses	$(260,000)	Selling expenses%	(188,800)	Selling expenses%
Administrative expenses	(169,000)	Administrative expenses%	(177,000)	Administrative expenses%
Total operating expenses	$(429,000)	Total operating expenses%	$(365,800)	Total operating expenses%
Operating income	$188,500	Operating income%	$200,600	Operating income%
Other revenue	78,000	Other revenue%	70,800	Other revenue%
Income before income tax expense	$266,500	Income before income tax expense%	$271,400	Income before income tax expense%
Income tax expense	(117,000)	Income tax expense%	(106,200)	Income tax expense%
Net income	$149,500	Net income%	$165,200	Net income%