Question

Revenue and expense data for Innovation Quarter Inc. for two recent years are as follows:

	Current Year		Previous Year
Sales	$488,000		$410,000
Cost of goods sold	287,920		217,300
Selling expenses	78,080		77,900
Administrative expenses	87,840		69,700
Income tax expense	14,640		16,400

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	$488,000	%	$410,000	%
Cost of goods sold	287,920	%	217,300	%
Gross profit	$	%	$	%
Selling expenses	78,080	%	77,900	%
Administrative expenses	87,840	%	69,700	%
Total operating expenses	$	%	$	%
Income from operations		%		%
Income tax expense	14,640	%	16,400	%
Net income	$	%	$	%

b. The vertical analysis indicates that the cost of goods sold as a percent of sales   by 6 percentage points, while selling expenses   by 3 percentage points, and administrative expenses   by 1 percentage points. Thus, net income as a percent of sales   by 3 percentage points.

Answer 1

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