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	$413,000		$372,000
Cost of merchandise sold	223,020		182,280
Selling expenses	74,340		74,400
Administrative expenses	82,600		70,680
Income tax expense	12,390		18,600

Question Content Area

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. (please show work)

b. The vertical analysis indicates that the cost of merchandise sold as a percent of sales by 5 percentage points, while selling expenses by 2 percentage points, and administrative expenses by 1 percentage points. Thus, net income as a percent of sales by 2 percentage points