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4 CengageNOWv2T online teachX genow.com/lrn/takeAssignment/takeAssignmentMain.do?invoker-assignments&takeAssignmentSessionLocatorwassignment...; . E Calculator Print Itom Current Year Previous Year Sales Cost of goods sold Selling expenses Administrative expenses Income tax expense 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 $602,000 337,120 108,360 114,380 18,060 S548,000 274,000 109,600 98,640 27,400 Innovation Quarter Inc. Comparative Income Statement For the Years Ended December 31 Current year Amount Current year Percent Previous year Amount Previous year Percent $548,000 274,000 Sales $602,000 100 100 Cost of goods sold 337,120 s0 Gross profit 64880 108,360 114,380 44 % Seling expenses 109,600 20 % 19 Total operating expenses Income from operations Income tax expense Net income 222,740 208,240 38 % 18,060 27,400 b. The vertical analysis indicates that the cost of goods sold as a percent of sales by 6 percentage points, while selling expenses by 2 percentage points, and administrative expenses by 1 percentage points. Thus, net income as a percent of sales by 3 percentage points

Explanation / Answer

Current year amount % Previous year amount % Sales 602000 100.0% 548000 100.0% Cost of goods sold 337120 56.0% 274000 50.0% Gross profit 264880 44.0% 274000 50.0% Selling expenses 108360 18.0% 109600 20.0% Administrative expenses 114380 19.0% 98640 18.0% Total operating expenses 222740 37.0% 208240 38.0% Income from operations 42140 7.0% 65760 12.0% Income tax expense 18060 3.0% 27400 5.0% Net income 24080 4.0% 38360 7.0% b The vertical analysis indicates that cost of goods sold as a % of sales increased by 6%, while selling expenses decreased by 2%,and administrative expenses increased by 1%. Thus net income decreased by 3%

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