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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 Quarter Inc.
Comparative Income Statement
For the Years Ended December 31
Current year Amount Current year Percent Previous year Amount Previous year Percent
Sales $518,000 % $471,000 %
Cost of goods sold 290,080 % 240,210 %
Gross profit $ % $ %
Selling expenses 93,240 % 94,200 %
Administrative expenses 98,420 % 80,070 %
Total operating expenses $ % $ %
Income from operations % %
Income tax expense 15,540 % 23,550 %
Net income $ % $ %

b. The vertical analysis indicates that the cost of goods sold as a percent of sales increased by 5 percentage points, while selling expenses increased by 2 percentage points, and administrative expenses by 2 percentage points. Thus, net income as a percent of sales by 3 percentage points.

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Expert Solution

VERTICAL ANALYSIS OF INCOME STATEMENT
Particulars Current Year Amount Current Year % Previous Year Amount Previous Year %
Sales $       5,18,000 100% $                      4,71,000 100.00%
Cost oF Goods Sold $       2,90,080 56.00% $                      2,40,210 51.00%
Gross Profit $       2,27,920 44.00% $                      2,30,790 49.00%
Selling Expenses $           93,240 18.00% $                          94,200 20.00%
Adminstrative Expenses $           98,420 19.00% $                          80,070 17.00%
Total Operating Expenses $       1,91,660 37.00% $                      1,74,270 37.00%
Income From Operation $           36,260 7.00% $                          56,520 12.00%
Income tax Expenses $           15,540 3.00% $                          23,550 5.00%
Net Income $           20,720 4.00% $                          32,970 7.00%

ekkarill92 answered 2 years ago
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