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Vertical Analysis of Income Statement For 20Y2, Tri-Comic Company initiated a sales promotion campaign that included the expenditure of an additional $14,000 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 $14,000 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 2041 20Y2 2011 Sales $487,000 $419,000 Cost of goods sold 248,370 238,830 Gross profit $238,630 $180,170 Selling expenses $102,270 $83,800 Administrative expenses 53,570 54,470 $155,840 $138,270 Total operating expenses Income from operations $82,790 $41,900 Other income 14,610 12,570 Income before income tax $97,400 $54,470 Income tax expense 38,960 20,950 Net income $58,440 $33,520 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, 2012 and 20Y1 20Y2 Amount 20Y2 Percent 20Y1 Amount 20Y1 Percent Sales $487,000 100 % $419,000 % Cost of goods sold 248,370 51 % 238,830 % Gross profit $238,630 50 % $180,170 % Selling expenses 102,270 % 83,800 % Administrative expenses 53,570 % 54,470 % Total operating expenses $155,840 % $138,270 % Income from operations $82,790 % $41,900 % Other income 14,610 % 12,570 % Income before income tax $97,400 % $54,470 % Income tax expense 38,960 % 20,950 % Net income $58,440 % $33,520 % 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 appear to be hoop While selling expenses as a percent of sales slightly, the cost wa improved ade up for by sales deteriorated
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