Question

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 Quarter Inc.
Comparative Income Statement
For the Years Ended December 31
	Current year Amount	Current year Percent	Previous year Amount	Previous year Percent
Sales	$432,000	%	$372,000	%
Cost of goods sold	267,840	%	212,040	%
Gross profit	$	%	$	%
Selling expenses	64,800	%	63,240	%
Administrative expenses	73,440	%	59,520	%
Total operating expenses	$	%	$	%
Income from operations		%		%
Income tax expense	8,640	%	14,880	%
Net income	$	%	$	%

Answer 1

Innovation Quarter Inc
Comparative Income statement
Particulars		Current year	%	previous year	%
sale		$           4,32,000.00	100%	$     3,72,000.00	100%
cost of goods sold		$           2,67,840.00	62%	$     2,12,040.00	57%
Gross profit		$           1,64,160.00	38%	$     1,59,960.00	43%
Selling expenses		$              64,800.00	15%	$         63,240.00	17%
administrative exp		$              73,440.00	17%	$         59,520.00	16%
total operating expenses		$           1,38,240.00	32%	$     1,22,760.00	33%
income from operation		$              25,920.00	6%	$         37,200.00	10%
income tax expenses		$                 8,640.00	2%	$         14,880.00	4%
Net income		$              17,280.00	4%	$         22,320.00	6%