Question
Vertical Analysis of Income Statement Revenue and expense data for Innovation Quarter Inc. for two recent years are as follows: Current Year Previous Year Sales
Vertical Analysis of Income Statement
Revenue and expense data for Innovation Quarter Inc. for two recent years are as follows:
Current Year | Previous Year | |||
Sales | $392,000 | $353,000 | ||
Cost of goods sold | 231,280 | 180,030 | ||
Selling expenses | 62,720 | 70,600 | ||
Administrative expenses | 70,560 | 60,010 | ||
Income tax expense | 11,760 | 17,650 |
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 | $392,000 | % | $353,000 | % |
Cost of goods sold | 231,280 | % | 180,030 | % |
$ | % | $ | % | |
Selling expenses | 62,720 | % | 70,600 | % |
Administrative expenses | 70,560 | % | 60,010 | % |
$ | % | $ | % | |
% | % | |||
Income tax expense | 11,760 | % | 17,650 | % |
$ | % | $ | % |
b. The vertical analysis indicates that the cost of goods sold as a percent of sales by 8 percentage points, while selling expenses by 4 percentage points, and administrative expenses by 1 percentage points. Thus, net income as a percent of sales by 3 percentage points.
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