Vertical Analysis of Income Statement For 20Y2, Tri-Comic Company initiated a sa
ID: 2390662 • Letter: V
Question
Vertical Analysis of Income Statement
For 20Y2, Tri-Comic Company initiated a sales promotion campaign that included the expenditure of an additional $20,000 for advertising. At the end of the year, Lumi Neer, the president, is presented with the following condensed comparative income statement:
Required:
1. Prepare a comparative income statement for the two-year period, presenting an analysis of each item in relationship to sales for each of the years. Enter percentages as whole numbers. Enter all amounts as positive numbers.
Tri-Comic CompanyComparative Income Statement
For the Years Ended December 31, 20Y2 and 20Y1 20Y2 20Y1 Sales $700,000 $602,000 Cost of goods sold 357,000 343,140 Gross profit $343,000 $258,860 Selling expenses $140,000 $114,380 Administrative expenses 70,000 72,240 Total operating expenses $210,000 $186,620 Income from operations $133,000 $72,240 Other income 35,000 30,100 Income before income tax $168,000 $102,340 Income tax expense 70,000 42,140 Net income $98,000 $60,200
Explanation / Answer
Comparitive income statements are prepared for analysing the results of operations over multiple accounting periods with a few different options for review. It is a document that compares a particular financial statement with prior period statements. Percentage are calculated as a % of sales For eg : Sales / Sales *100 , Cost of goods sold / sales *100 Tri-Comic Company Comparative Income Statement For the Years Ended December 31, 20Y2 and 20Y1 20Y2 Amount 20Y2 Percent 20Y1 Amount 20Y1 Percent Sales $700,000 100% $602,000 100% Cost of goods sold 357,000 51% 343,140 57% Gross profit $343,000 49% $258,860 43% Selling expenses 140,000 20% 114,380 19% Administrative expenses 70,000 10% 72,240 12% Total operating expenses $210,000 30% $186,620 31% Income from operations $133,000 19% $72,240 12% Other income 35,000 5% 30,100 5% Income before income tax $168,000 24% $102,340 17% Income tax expense 70,000 10% 42,140 7% Net income $98,000 14% $60,200 10%
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