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	$506,000		$425,000
Cost of goods sold	293,480		221,000
Selling expenses	86,020		80,750
Administrative expenses	91,080		72,250
Income tax expense	15,180		21,250

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.

b. The vertical analysis indicates that the cost of goods sold as a percent of sales (increased, decreased) by 6 percentage points, while selling expenses (increased, decreased)

by 2 percentage points, and administrative expenses (increased, decreased) by 1 percentage points. Thus, net income as a percent of sales (increased, decreased) by 3 percentage points.

Innovation Quarter Inc. Comparative Income Statement For the Years Ended December 31 Current year Amount Current year Percent Previous year Amount Previous year Percent $506,000 % $425,000 % 293,480 % 221,000 % Sales Cost of goods sold % % Selling expenses 86,020 % 80,750 % Administrative expenses 91,080 % 72,250 % % $ % % % Income tax expense 15,180 % 21,250 % % %