Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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 $518,000 $471,000
Cost of goods sold 290,080 240,210
Selling expenses 93,240 94,200
Administrative expenses 98,420 80,070
Income tax expense 15,540 23,550

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 $518,000 % $471,000 %
Cost of goods sold 290,080 % 240,210 %
Gross profit $ % $ %
Selling expenses 93,240 % 94,200 %
Administrative expenses 98,420 % 80,070 %
Total operating expenses $ % $ %
Income from operations % %
Income tax expense 15,540 % 23,550 %
Net income $ % $ %

b. The vertical analysis indicates that the cost of goods sold as a percent of sales increased by 5 percentage points, while selling expenses increased by 2 percentage points, and administrative expenses by 2 percentage points. Thus, net income as a percent of sales by 3 percentage points.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Auditing And Systems Exam Questions And Explanations

Authors: Ph.D. Gleim, Irvin N., Ph.D. Hillison, William A., Grady M. Irwin

17th Edition

ISBN: 1581949278, 978-1581949278

More Books

Students also viewed these Accounting questions

Question

5. Identify three characteristics of the dialectical approach.

Answered: 1 week ago