Question

Vertical Analysis of Income Statement

For 20Y2, Tri-Comic Company initiated a sales promotion campaign that included the expenditure of an additional $20,000 for advertising. At the end of the year, Lumi Neer, the president, is presented with the following condensed comparative income statement:

Tri-Comic Company Comparative Income Statement For the Years Ended December 31, 20Y2 and 20Y1
	20Y2		20Y1
Sales	$700,000		$602,000
Cost of goods sold	357,000		343,140
Gross profit	$343,000		$258,860
Selling expenses	$140,000		$114,380
Administrative expenses	70,000		72,240
Total operating expenses	$210,000		$186,620
Income from operations	$133,000		$72,240
Other income	35,000		30,100
Income before income tax	$168,000		$102,340
Income tax expense	70,000		42,140
Net income	$98,000		$60,200

Required:

1. Prepare a comparative income statement for the two-year period, presenting an analysis of each item in relationship to sales for each of the years. Enter percentages as whole numbers. Enter all amounts as positive numbers.

Tri-Comic Company
Comparative Income Statement
For the Years Ended December 31, 20Y2 and 20Y1
	20Y2 Amount	20Y2 Percent	20Y1 Amount	20Y1 Percent
Sales	$700,000	%	$602,000	%
Cost of goods sold	357,000	%	343,140	%
Gross profit	$343,000	%	$258,860	%
Selling expenses	140,000	%	114,380	%
Administrative expenses	70,000	%	72,240	%
Total operating expenses	$210,000	%	$186,620	%
Income from operations	$133,000	%	$72,240	%
Other income	35,000	%	30,100	%
Income before income tax	$168,000	%	$102,340	%
Income tax expense	70,000	%	42,140	%
Net income	$98,000	%	$60,200	%

Answer 1

Comparitive income statements are prepared for analysing the results of operations over multiple accounting periods with a few different options for review.
It is a document that compares a particular financial statement with prior period statements.
Percentage are calculated as a % of sales
For eg : Sales / Sales *100 , Cost of goods sold / sales *100
Tri-Comic Company
Comparative Income Statement
For the Years Ended December 31, 20Y2 and 20Y1
	20Y2 Amount	20Y2 Percent	20Y1 Amount	20Y1 Percent
Sales	$700,000	100%	$602,000	100%
Cost of goods sold	357,000	51%	343,140	57%
Gross profit	$343,000	49%	$258,860	43%
Selling expenses	140,000	20%	114,380	19%
Administrative expenses	70,000	10%	72,240	12%
Total operating expenses	$210,000	30%	$186,620	31%
Income from operations	$133,000	19%	$72,240	12%
Other income	35,000	5%	30,100	5%
Income before income tax	$168,000	24%	$102,340	17%
Income tax expense	70,000	10%	42,140	7%
Net income	$98,000	14%	$60,200	10%