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 $541,000 $471,000

Cost of merchandise sold 335,420 263,760

Selling expenses 81,150 84,780

Administrative expenses 91,970 70,650

Income tax expense 10,820 18,840

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.

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 $541,000 % $471,000 % Cost of merchandise sold 335,420 % 263,760 % Gross profit % % Selling expenses 81,150 % 84,780 % Administrative expenses 91,970 % 70,650 % Income from operations % % Income from operations % % Income tax expense 10,820 % 18,840 % Income from operations X % % Feedback b. The vertical analysis indicates that the cost of merchandise sold as a percent of sales increased selling expenses decreased by 3 percentage points, and administrative expenses increased Thus, net income as a percent of sales decreased by 3 percentage points. by 6 percentage points, while by 2 percentage points