Question
For 2010, Othere Technology Company initiated a sales promotion campaign that included the expenditure of an additional $20,000 for advertising. At the end of the
For 2010, Othere Technology Company initiated a sales promotion campaign that
included the expenditure of an additional $20,000 for advertising. At the end of the
year, George Wallace, the president, is presented with the following condensed comparative
income statement:
Instruction1. Prepare a comparative income statement for the two-year period, presenting an
analysis of each item in relationship to net sales for each of the years. Round to one
decimal place.
2. To the extent the data permit, comment on the significant relationships
revealed by the vertical analysis prepared in (1).
Fill in the blank percents:
OTHERE TECHNOLOGY COMPANY | ||||||||||
Comparative Income Statement | ||||||||||
For the Years Ended December 31, 2010 and 2009 | ||||||||||
2010 | 2009 | |||||||||
Amount | Percent | Amount | Percent | |||||||
Sales | $714,000 | 102.0% | $612,000 | 102.0% | ||||||
Sales returns and allowances | 14,000 | 2.0% | 12,000 | 2.0% | ||||||
Net sales | $700,000 | 100.0% | $600,000 | 100.0% | ||||||
Cost of goods sold | 322,000 | 46.0% | 312,000 | 52.0% | ||||||
Gross profit | $378,000 | 54.0% | $288,000 | 48.0% | ||||||
Selling expenses | $154,000 | $120,000 | ||||||||
Administrative expenses | 70,000 | 66,000 | ||||||||
Total operating expenses | $224,000 | $186,000 | ||||||||
Income from operations | $154,000 | $102,000 | ||||||||
Other income | 28,000 | 24,000 | ||||||||
Income before income tax | $182,000 | $126,000 | ||||||||
Income tax expense (benefit) | 70,000 | 60,000 | ||||||||
Net income (loss) | $112,000 | $66,000 | ||||||||
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