For 2016, Indigo Company initiated a sales promotion campaign that included the expenditure of an additional $39,000 for advertising. At the end of the year, Lumi Neer, the president, is presented with the following condensed comparative income statement:
Indigo Company |
Comparative Income Statement |
For the Years Ended December 31, 2016 and 2015 |
1 |
2016 |
2015 |
|
2 |
Sales |
$940,000.00 |
$540,000.00 |
3 |
Cost of goods sold |
338,400.00 |
205,200.00 |
4 |
Gross profit |
$601,600.00 |
$334,800.00 |
5 |
Selling expenses |
$159,800.00 |
$81,000.00 |
6 |
Administrative expenses |
47,000.00 |
37,800.00 |
7 |
Total operating expenses |
$206,800.00 |
$118,800.00 |
8 |
Income from operations |
$394,800.00 |
$216,000.00 |
9 |
Other income |
75,200.00 |
43,200.00 |
10 |
Income before income tax |
$470,000.00 |
$259,200.00 |
11 |
Income tax expense |
235,000.00 |
135,000.00 |
12 |
Net income |
$235,000.00 |
$124,200.00 |
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. Round your percentages to one decimal place. Enter all amounts as positive numbers. |
2. |
To the extent the data permit, comment on the significant relationships revealed by the vertical analysis prepared in (1). |
1. Prepare an income statement in comparative form, stating each item for both years as a percent of sales. Round your percentages to one decimal place. Enter all amounts as positive numbers.
Indigo Company |
Comparative Income Statement |
For the Years Ended December 31, 2016 and 2015 |
1 |
2016 |
2016 |
2015 |
2015 |
|
2 |
Amount |
Percent |
Amount |
Percent |
|
3 |
Sales |
$940,000.00 |
$540,000.00 |
||
4 |
Cost of goods sold |
338,400.00 |
205,200.00 |
||
5 |
Gross profit |
$601,600.00 |
$334,800.00 |
||
6 |
Selling expenses |
$159,800.00 |
$81,000.00 |
||
7 |
Administrative expenses |
47,000.00 |
37,800.00 |
||
8 |
Total operating expenses |
$206,800.00 |
$118,800.00 |
||
9 |
Income from operations |
$394,800.00 |
$216,000.00 |
||
10 |
Other income |
75,200.00 |
43,200.00 |
||
11 |
Income before income tax |
$470,000.00 |
$259,200.00 |
||
12 |
Income tax expense |
235,000.00 |
135,000.00 |
||
13 |
Net income |
$235,000.00 |
$124,200.00 |
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