For 2014, Fielder Industries Inc. initiated a sales promotion campaign that incl

Question

For 2014, Fielder Industries Inc. initiated a sales promotion campaign that included the expenditure of an additional $40,000 for advertising. At the end of the year, Leif Grando, the president, is presented with the following condensed comparative income statement: Instructions 1.Prepare a comparative income statement for the two-year period, presenting an analysis of each item in relationship to net sales for each of the years. Round to one decimal place.

                                                                                  2014                    2013

comparative income statements 2014 and 2013 Sales 1,325,000 1,200,000 sales returns amd allowances 25,000 20,000 Net sales 1,300,000 1,800,000 Cost of Goods sold 682,500 613,600 Gross Profit 617,500 566,400 Selling Expenses 260,000 188,000 Administrative Expenses 169,000 177,000 Total Operating Expenses 429,000 365,800 Income from operations 188,500 200,600 Other Income 78,000 70,800 Income before income tax 266,500 271,400 Income tax expense 117,000 106,200 Net Income 149,500 165,200

Explanation / Answer

2014 2013 2014 Percentage 2013 Percentage Sales 1,325,000 1,200,000 sales returns amd allowances 25,000 20,000 Net sales 1,300,000 1,800,000 100.0% 100% Cost of Goods sold 682,500 613,600 52.5% 34.1% Gross Profit 617,500 566,400 47.5% 31.5% Selling Expenses 260,000 188,000 20.0% 10.4% Administrative Expenses 169,000 177,000 13.0% 9.8% Total Operating Expenses 429,000 365,800 33.0% 20.3% Income from operations 188,500 200,600 14.5% 11.1% Other Income 78,000 70,800 6.0% 3.9% Income before income tax 266,500 271,400 20.5% 15.1% Income tax expense 117,000 106,200 9.0% 5.9% Net Income 149,500 165,200 11.5% 9.2%

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