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 $$501,000$ $$421,000$

Cost of merchandise sold $295,590218,920$

Selling expenses $80,16079,990$

Administrative expenses $90,18071,570$

Income tax expense $15,03021,050$

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.

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 $$501,000$ fill in the blank $5974$a$3$f$55036$ff$2\_1$

$\%$ $$421,000$ fill in the blank $5974$a$3$f$55036$ff$2\_2$

$\%$

Cost of merchandise sold $295,590$ fill in the blank $5974$a$3$f$55036$ff$2\_3$

$\%218,920$ fill in the blank $5974$a$3$f$55036$ff$2\_4$

$\%$

$$-$ Select $-$

$-$ Select $-$

$\%$ $$-$ Select $-$

$-$ Select $-$

$\%$

Selling expenses $80,160$ fill in the blank $5974$a$3$f$55036$ff$2\_10$

$\%79,990$ fill in the blank $5974$a$3$f$55036$ff$2\_11$

$\%$

Administrative expenses $90,180$ fill in the blank $5974$a$3$f$55036$ff$2\_12$

$\%71,570$ fill in the blank $5974$a$3$f$55036$ff$2\_13$

$\%$

$$-$ Select $-$

$-$ Select $-$

$\%$ $$-$ Select $-$

$-$ Select $-$

$\%$

$-$ Select $-$

$-$ Select $-$

$\%-$ Select $-$

$-$ Select $-$

$\%$

Income tax expense $15,030$ fill in the blank $5974$a$3$f$55036$ff$2\_24$

$\%21,050$ fill in the blank $5974$a$3$f$55036$ff$2\_25$

$\%$

$$-$ Select $-$

$-$ Select $-$

$\%$ $$-$ Select $-$

$-$ Select $-$

$\%$

Question Content Area

b$.$ The vertical analysis indicates that the cost of merchandise sold as a percent of sales

by $7$ percentage points, while selling expenses

by $3$ percentage points, and administrative expenses

by $1$ percentage points. Thus, net income as a percent of sales

by $3$ percentage points.