eBook Show Me How Question Content Area Vertical Analysis of Income Statement Revenue and expense data for Innovation Quarter Inc. for two recent years are as follows: Current Year Previous Year Sales $565,000 $492,000 Cost of merchandise sold 355,950 285,360 Selling expenses 84,750 83,640 Administrative expenses 90,400 73,800 Income tax expense 11,300 19,680 Question Content Area a. Prepare an income statement in comparative form, stating each item for both years as a percent of sales. If required, round percentages to one decimal place. Enter all amounts as positive numbers. Innovation Quarter Inc. Comparative Income Statement For the Years Ended December 31 Current year Amount Current year Percent Previous year Amount Previous year Percent Sales $565,000 fill in the blank d5b06f01e001000_1 % $492,000 fill in the blank d5b06f01e001000_2 % Cost of merchandise sold 355,950 fill in the blank d5b06f01e001000_3 % 285,360 fill in the blank d5b06f01e001000_4 % $- Select - - Select - % $- Select - - Select - % Selling expenses 84,750 fill in the blank d5b06f01e001000_10 % 83,640 fill in the blank d5b06f01e001000_11 % Administrative expenses 90,400 fill in the blank d5b06f01e001000_12 % 73,800 fill in the blank d5b06f01e001000_13 % $- Select - - Select - % $- Select - - Select - % - Select - - Select - % - Select - - Select - % Income tax expense 11,300 fill in the blank d5b06f01e001000_24 % 19,680 fill in the blank d5b06f01e001000_25 % $- Select - - Select - % $- Select - - Select - % Question Content Area b. The vertical analysis indicates that the cost of merchandise sold as a percent of sales by 5 percentage points, while selling expenses by 2 percentage points, and administrative expenses by 1 percentage points. Thus, net income as a percent of sales increased decreased

by 2 percentage points.