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	$435,000		$396,000
Cost of goods sold	269,700		221,760
Selling expenses	65,250		71,280
Administrative expenses	73,950		59,400
Income tax expense	8,700		15,840

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.

(For the blanks on the far left the answer options are: Gross profit | Income from Operations | Net Income | Total operating expenses)

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	$435,000	________%	$396,000	________%
Cost of goods sold	269,700	________%	221,760	________%
_____________	$______	________%	$____	________%
Selling expenses	65,250	________%	71,280	________%
Administrative expenses	73,950	_________%	59,400	________%
___________	$______	_________%	$_____	________%
__________	_______	_________%	______	________%
Income tax expense	8,700	_________%	15,840	________%
_____________	$_____	________%	$_____	________%

Answer 1

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	$435,000	100.0%	$396,000	100.0%
Cost of goods sold	$269,700	62.0%	$221,760	56.0%
Gross Profits	$165,300	38.0%	$174,240	44.0%
Selling expenses	$65,250	15.0%	$71,280	18.0%
Administrative expenses	$73,950	17.0%	$59,400	15.0%
Total Operating expense	$139,200	32.0%	$130,680	33.0%
Operating income or Income from Operations	$26,100	6.0%	$43,560	11.0%
Income tax expense	$8,700	2.0%	$15,840	4.0%
Net Income	$17,400	4.0%	$27,720	7.0%