Question
Vertical Analysis of Income Statement For 20Y2, Tri-Comic Company initiated a sales promotion campaign that included the expenditure of an additional $16,000 for advertising. At
Vertical Analysis of Income Statement
For 20Y2, Tri-Comic Company initiated a sales promotion campaign that included the expenditure of an additional $16,000 for advertising. At the end of the year, Lumi Neer, the president, is presented with the following condensed comparative income statement:
Tri-Comic Company Comparative Income Statement For the Years Ended December 31, 20Y2 and 20Y1 | |||
20Y2 | 20Y1 | ||
Sales | $575,000 | $495,000 | |
Cost of goods sold | 281,750 | 267,300 | |
Gross profit | $293,250 | $227,700 | |
Selling expenses | $109,250 | $89,100 | |
Administrative expenses | 57,500 | 59,400 | |
Total operating expenses | $166,750 | $148,500 | |
Income from operations | $126,500 | $79,200 | |
Other revenue | 17,250 | 19,800 | |
Income before income tax | $143,750 | $99,000 | |
Income tax expense | 57,500 | 39,600 | |
Net income | $86,250 | $59,400 |
Required:
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. Enter percentages as whole numbers. Enter all amounts as positive numbers.
Tri-Comic Company | ||||
Comparative Income Statement | ||||
For the Years Ended December 31, 20Y2 and 20Y1 | ||||
20Y2 Amount | 20Y2 Percent | 20Y1 Amount | 20Y1 Percent | |
Sales | $575,000 | % | $495,000 | % |
Cost of goods sold | 281,750 | % | 267,300 | % |
Gross profit | $293,250 | % | $227,700 | % |
Selling expenses | $109,250 | % | $89,100 | % |
Administrative expenses | 57,500 | % | 59,400 | % |
Total operating expenses | $166,750 | % | $148,500 | % |
Income from operations | $126,500 | % | $79,200 | % |
Other revenue | 17,250 | % | 19,800 | % |
Income before income tax | $143,750 | % | $99,000 | % |
Income tax expense | 57,500 | % | 39,600 | % |
Net income | $86,250 | % | $59,400 | % |
2. The vertical analysis indicates that the costs other than selling expenses (cost of goods sold and administrative expenses) as a percentage of sales. As a result, net income as a percentage of sales . The sales promotion campaign appears to have been . While selling expenses as a percent of sales slightly, the cost was more than made up for by sales.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started