Question

In: Accounting

Vertical Analysis of Income Statement Revenue and expense data for Innovation Quarter Inc. for two recent...

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 $500,000 $440,000
Cost of goods sold 340,000 277,200
Selling expenses 65,000 66,000
Administrative expenses 70,000 57,200
Income tax expense 10,000 17,600

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 $500,000 % $440,000 %
Cost of goods sold 340,000 % 277,200 %
$ % $ %
Selling expenses 65,000 % 66,000 %
Administrative expenses 70,000 % 57,200 %
$ % $ %
% %
Income tax expense 10,000 % 17,600 %
$ % $ %

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.

Solutions

Expert Solution

  • Requirement [a]

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

$500,000

100.0%

$440,000

100.0%

Cost of goods sold

$340,000

68.0%

$277,200

63.0%

Gross Profits

$160,000

32.0%

$162,800

37.0%

Selling expenses

$65,000

13.0%

$66,000

15.0%

Administrative expenses

$70,000

14.0%

$57,200

13.0%

Total Operating expense

$135,000

27.0%

$123,200

28.0%

Operating income or Income from Operations

$25,000

5.0%

$39,600

9.0%

Income tax expense

$10,000

2.0%

$17,600

4.0%

Net Income

$15,000

3.0%

$22,000

5.0%

  • Requirement [b]

The vertical analysis indicates that the cost of goods sold as a percent of sales  INCREASED by 5 percentage points, while selling expenses  DECREASED by 2 percentage points, and administrative expenses INCREASED  by 1 percentage points. Thus, net income as a percent of sales  DECREASED by 2 percentage points.


Related Solutions

Vertical Analysis of Income Statement Revenue and expense data for Innovation Quarter Inc. for two recent...
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 $450,000 $387,000 Cost of goods sold 270,000 212,850 Selling expenses 72,000 69,660 Administrative expenses 76,500 61,920 Income tax expense 13,500 15,480 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...
Vertical Analysis of Income Statement Revenue and expense data for Innovation Quarter Inc. for two recent...
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 $392,000 $353,000 Cost of goods sold 231,280 180,030 Selling expenses 62,720 70,600 Administrative expenses 70,560 60,010 Income tax expense 11,760 17,650 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...
Vertical Analysis of Income Statement Revenue and expense data for Innovation Quarter Inc. for two recent...
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 $518,000 $471,000 Cost of goods sold 290,080 240,210 Selling expenses 93,240 94,200 Administrative expenses 98,420 80,070 Income tax expense 15,540 23,550 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...
Vertical Analysis of Income Statement Revenue and expense data for Innovation Quarter Inc. for two recent...
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 $511,000 $439,000 Cost of goods sold 281,050 219,500 Selling expenses 91,980 87,800 Administrative expenses 97,090 79,020 Income tax expense 15,330 21,950 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...
Vertical Analysis of Income Statement Revenue and expense data for Innovation Quarter Inc. for two recent...
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 $620,000 $539,000 Cost of goods sold 353,400 274,890 Selling expenses 105,400 107,800 Administrative expenses 117,800 91,630 Income tax expense 18,600 26,950 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...
Vertical Analysis of Income Statement Revenue and expense data for Innovation Quarter Inc. for two recent...
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 $454,000 $409,000 Cost of goods sold 267,860 216,770 Selling expenses 72,640 77,710 Administrative expenses 81,720 69,530 Income tax expense 13,620 16,360 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...
Vertical Analysis of Income Statement Revenue and expense data for Innovation Quarter Inc. for two recent...
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 $454,000 $409,000 Cost of goods sold 267,860 216,770 Selling expenses 72,640 77,710 Administrative expenses 81,720 69,530 Income tax expense 13,620 16,360 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...
Vertical Analysis of Income Statement Revenue and expense data for Innovation Quarter Inc. for two recent...
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 $567,000 $493,000 Cost of goods sold 385,560 310,590 Selling expenses 73,710 73,950 Administrative expenses 79,380 64,090 Income tax expense 11,340 19,720 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...
Vertical Analysis of Income Statement Revenue and expense data for Innovation Quarter Inc. for two recent...
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 $580,000 $522,000 Cost of goods sold 324,800 261,000 Selling expenses 104,400 104,400 Administrative expenses 110,200 93,960 Income tax expense 17,400 26,100 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...
Vertical Analysis of Income Statement Revenue and expense data for Innovation Quarter Inc. for two recent...
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 $432,000 $372,000 Cost of goods sold 267,840 212,040 Selling expenses 64,800 63,240 Administrative expenses 73,440 59,520 Income tax expense 8,640 14,880 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...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT