Question
Revenue and expense data for Innovation Quarter Inc. for two recent years are as follows: Current Year Previous Year Sales $597,000 $543,000 Cost of goods
Revenue and expense data for Innovation Quarter Inc. for two recent years are as follows:
Current Year | Previous Year | |||
Sales | $597,000 | $543,000 | ||
Cost of goods sold | 370,140 | 304,080 | ||
Selling expenses | 89,550 | 97,740 | ||
Administrative expenses | 101,490 | 81,450 | ||
Income tax expense | 11,940 | 21,720 |
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 | $597,000 | % | $543,000 | % |
Cost of goods sold | 370,140 | % | 304,080 | % |
Gross profit | $ | % | $ | % |
Selling expenses | 89,550 | % | 97,740 | % |
Administrative expenses | 101,490 | % | 81,450 | % |
Total operating expenses | $ | % | $ | % |
Income from operations | % | % | ||
Income tax expense | 11,940 | % | 21,720 | % |
Net income | $ | % | $ | % |
b. The vertical analysis indicates that the cost of goods sold as a percent of sales by 6 percentage points, while selling expenses by 3 percentage points, and administrative expenses by 2 percentage points. Thus, net income as a percent of sales by 3 percentage points.
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