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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 $562,000 $495.000 Cast of goods sold 297,860 227,700 Selling expenses 106,780 108,900 Administrative expenses 112,400 94,050 Income tax expense 16,860 24,750 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 Year Ended December 31 Current year Amount Current year Percent Previous year Amount Previous year Percent Sales $552,000 5495.000 Cost of goods sold 297,860 227,700 Gross profit Selling expenses 106,780 108.900 Administrative expenses 112,400 Total operating expenses Income from operations Income tax expense 35,860 Not income Foodback a Sales minus cost of goods sold equals gross profit. Gross profit minus selling expenses and administrative expenses equals income from operations. Income from operations minus income tax expense equals net income. For each year, divide each income statement element by sales to determine the vertical analysis percentage Leaming Objective 2 b. The vertical analysis indicates that the cost of goods sold as a percent of sales increased by 7 percentage points, while selling expenses decreased by 3 percentage points, and administrative expenses increased by 1 percentage points. Thus, net income as a percent of sales decreased by 3 percentage points
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