Question

Revenue and expense data for Searle Technologies Co. are as follows:

The following comparative income statement (in thousands of dollars) for two recent years was adapted from the annual report of Speedway Motorsports, Inc. (TRK), owner and operator of several major motor speedways, such as the Atlanta, Bristol, Charlotte, Texas, and Las Vegas Motor Speedways. Year 2 Year 1 Revenues: Admissions $100,798 $106,050 Event-related revenue 146,849 145,749 NASCAR broadcasting revenue 207,369 199,014 Other operating revenue 29,293 29,836 Total revenue $484,309 $480,649 Expenses and other: Direct expense of events $(102,196) $(99,500) NASCAR purse and sanction fees (128,254) (125,003) Other direct expenses (18,513) (18,640) General and administrative (194,120) (286,069) Total expenses $(443,083) $(529,212) Income (loss) from continuing operations $ 41,226 $ 48,563 Note: "General & administrative expenses for the year 1 includes impairment of goodwill of $89,037. a. Prepare a comparative income statement for Years 1 and 2 in vertical form, stating each item as a percent of revenues. Round percentage answers to one decimal place. Speedway Motorsports, Inc. Comparative Income Statement (in thousands of dollars) For the Years Ended Year 2 and Year 1 Year 2 amount Year 2 percent Year 1 amount Year 1 percent Revenues: Admissions $100,798 % $106,050 % Event-related revenue 146,849 % 145,749 % NASCAR broadcasting revenue 207,369 % 199,014 % Other operating revenue 29,293 % 29,836 % Total revenue $484,309 % $480,649 % Expenses and other: Direct expense of events $(102,196) % $(99,500) % NASCAR purse and sanction fees (128,254) % (125,003) % Other direct expenses (18,513) % (18,640) % General and administrative (194,120) % (286,069) % Total expenses $(443,083) % $(529,212) % Operating income (loss) $41,226 % $(48,563) % b. What conclusion can be drawn from the analysis regarding the change in income?

a. Prepare an income statement in comparative form, stating each item for both 20Y8 and 20Y7 as a percent of sales. Round to one decimal place.

Searle Technologies Co.
Comparative Income Statement
For the Years Ended December 31, 20Y8 and 20Y7
	20Y8 Amount	20Y8 Percent	20Y7 Amount	20Y7 Percent
	$	%	$	%
		%		%
Gross profit	$	%	$	%
	$	%	$	%
		%		%
Total operating expenses	$	%	$	%
	$	%	$	%
		%		%
Net income	$	%	$	%

b. All of the following are true regarding the vertical analysis for Searle except:

Answer 1

	Revenue and expense data for Searle Technologies Co
		Year 2	Year 2
1	Revenue	$	In % to revenue	$	In % to revenue
	Admissions	100798	100%	106050	100%
	Gross Profit
	Event-related revenue	146849	100%	145749	100%
	Less: Direct expense of events	102196	70%	99500	68%
	Gross Profit	44653	30%	46249	32%
	NASCAR broadcasting revenue	207369	100%	199014	100%
	NASCAR purse and sanction fees	128254	62%	125003	63%
		79115	38%	74011	37%
	Operating Revenue	29293	100%	29836	100%
	Other Direct Expenses	18513	63%	18640	62%
	Gross Profit	10780	37%	11196	38%
		20Y8	20Y7
		$	In % to revenue	$	In % to revenue
	Revenue(Sales)	484309		480649
	Gross Profit
	Admissions	100798	20.81%	106050	22.06%
	Event-related revenue	44653	9.22%	46249	9.62%
	NASCAR broadcasting revenue	79115	16.34%	74011	15.40%
	Operating Revenue	10780	2.23%	11196	2.33%
	Total Gross Profit	235346	48.59%	237506	49.41%
	Operating Expenses
	General & Administrative Exp	194120	40.08%	197032	40.99%	(286069-89037)
	Goodwill impairment expenses			89037	18.52%
	Total Operating epenses	194120	40.08%	286069	59.52%
	Net Income(Gross profit-Oper. Exp)	41226	8.51%	-48563	-10.10%