Vertical Analysis of Income Statement Revenue and expense data for Innovation Qu
ID: 2537805 • Letter: V
Question
Vertical Analysis of Income Statement
Revenue and expense data for Innovation Quarter Inc. for two recent years are as follows:
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.
b. The vertical analysis indicates that the cost of goods sold as a percent of sales by 5 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 2 percentage points.
Current Year Previous Year Sales $480,000 $427,000 Cost of goods sold 259,200 209,230 Selling expenses 86,400 85,400 Administrative expenses 96,000 81,130 Income tax expense 14,400 21,350Explanation / Answer
Answer a. Innovation Quarter Inc. Comparative Income Statement For the Years Ended Dec 31 Current Year Previous Year Amount Percent Amount Percent Sales 480,000.00 100.00% 427,000.00 100.00% Cost of Goods Sold 259,200.00 54.00% 209,230.00 49.00% Gross Margin 220,800.00 46.00% 217,770.00 51.00% Selling Expenses 86,400.00 18.00% 85,400.00 20.00% Administrative Expenses 96,000.00 20.00% 81,130.00 19.00% Total Selling & Administrative Expense 182,400.00 38.00% 166,530.00 39.00% Net Operating Income 38,400.00 8.00% 51,240.00 12.00% Income Tax Expense 14,400.00 3.00% 21,350.00 5.00% Net Income 24,000.00 5.00% 29,890.00 7.00% Answer b. The vertical analysis indicates that the cost of goods sold as a percent of sales by 5 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 2 percentage points.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.