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 20Y1 Sales $1,300,000 $1,180,000 Cost of goods sold Gross profit Selling expenses Administrative expenses (682,500) $617,500 (613,600) $566,400 $(260,000) $(188,800) Total operating expenses (169,000) (177,000) $(429,000) $(365,800) Operating income Other revenue $188,500 78,000 Income before income tax expense $266,500 $200,600 70,800 $271,400 Income tax expense (117,000) (106,200) Net income $149,500 $165,200 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 Amount 20Y2 Percent 20Y1 Amount 20Y1 Percent Line Item Description Sales Cost of goods sold $1,300,000 (682,500) 52.5 X % 100 % $1,180,000 (613,600) 100 % 52 X % Gross profit $617,500 47.5 % $566,400 48 % Selling expenses $(260,000) 20 X % Administrative expenses (169,000) 13 X % (188,800) (177,000) 16 X % 15 X % Total operating expenses $(429,000) 30 X% $(365,800) 31 X % Operating income Other revenue $188,500 78,000 14.5 % $200,600 17 % 6% 70,800 6 % Income before income tax expense Income tax expense $266,500 (117,000) 20.5 % 9 % $271,400 (106,200) 23 % 9 % Net income $149,500 11.5 % $165,200 14 % Feedback Check My Work a. For each year, divide each income statement element by net sales to determine the vertical analysis percentage. b. Consider the relationship of each account to sales. Consider the impact of the sales promotion campaign. Did the percentages of each element increase or decrease over the two year period? 2. The net income as a percent of sales has decreased . All the costs and expenses, other than selling expenses, have maintained their approximate cost as a percent of sales relationship between 20Y1 and 2012. Selling expenses as a percent of sales, however, have increased . Apparently, the new advertising campaign has not been successful. The increased expense has not produced sufficient sales to maintain relative profitability. Thus, selling expenses as a percent of sales have increased