Question
Revenue and expense data for Gresham Inc. are as follows: Current Year Previous Year Sales $ 2,720,000 $2,050,000 Cost of goods sold 1,675,520 1,111,100 Selling
Revenue and expense data for Gresham Inc. are as follows:
Current Year | Previous Year | |
---|---|---|
Sales | $ 2,720,000 | $2,050,000 |
Cost of goods sold | 1,675,520 | 1,111,100 |
Selling expenses | 320,960 | 319,800 |
Administrative expenses | 424,320 | 262,400 |
Income tax expense | 152,320 | 118,900 |
Required: | |
A. | Prepare an income statement in comparative form, stating each item for both years as a percent of sales. Round your percentages answers to one decimal place. Enter all amounts as positive numbers. |
B. | Comment on the significant changes disclosed by the comparative income statement. |
Prepare an income statement in comparative form, stating each item for both years as a percent of sales. Round your percentages answers to one decimal place. Enter all amounts as positive numbers.
Gresham, Inc. |
Comparative Income Statement |
For the Years Ended December 31, 20-- and 20-- |
1 |
| Current year | Current year | Previous year | Previous year |
2 |
| Amount | Percent | Amount | Percent |
3 | Sales | $2,720,000.00 | $2,050,000.00 | ||
4 | Cost of goods sold | 1,675,520.00 | 1,111,100.00 | ||
5 | Gross profit | $1,044,480.00 | $938,900.00 | ||
6 | Selling expenses | $320,960.00 | $319,800.00 | ||
7 | Administrative expenses | 424,320.00 | 262,400.00 | ||
8 | Total operating expenses | $745,280.00 | $582,200.00 | ||
9 | Income from operations | $299,200.00 | $356,700.00 | ||
10 | Income tax expense | 152,320.00 | 118,900.00 | ||
11 | Net income | $146,880.00 | $237,800.00 |
Comment on the significant changes disclosed by the comparative income statement.
The vertical analysis indicates that the cost of goods sold as a percent of sales by 7.40 percentage points, while selling expenses by 3.80 percentage points, and administrative expenses by 2.80 percentage points. Thus, net income as a percent of sales by 6.20 percentage points.
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