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a. Prepare an income statement in comparative form, stating each item for both years as a percent of sales. Round to the nearest whole percentage.

a. Prepare an income statement in comparative form, stating each item for both years as a percent of sales. Round to the nearest whole percentage.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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 Cost of goods sold Selling expenses Administrative expenses Income tax expense Sales Cost of goods sold a. Prepare an income statement in comparative form, stating each item for both years as a percent of sales. Round to the nearest whole percentage. Innovation Quarter Inc. Comparative Income Statement For the Years Ended December 31 Selling expenses Administrative expenses Income tax expense $4,000,000 2,280,000 600,000 520,000 240,000 Current year Current year Previous year Previous year Amount Percent Amount Percent $4,000,000 (2,280,000) $ $(600,000) (520,000) $ $ (240,000) % % % % % $(648,000) (360,000) % $3,600,000 1,872,000 648,000 360,000 216,000 % % % $3,600,000 (1,872,000) $ $ (216,000) $ b. The vertical analysis indicates that the cost of goods sold as a percent of sales expenses % % % % % % % % % by 3 percentage points. Thus, net income as a percent of sales by 5 percentage points, while selling expenses by 5 percentage points. by 3 percentage points, and administrative
Transcribed Image Text: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 Cost of goods sold Selling expenses Administrative expenses Income tax expense Sales Cost of goods sold a. Prepare an income statement in comparative form, stating each item for both years as a percent of sales. Round to the nearest whole percentage. Innovation Quarter Inc. Comparative Income Statement For the Years Ended December 31 Selling expenses Administrative expenses Income tax expense $4,000,000 2,280,000 600,000 520,000 240,000 Current year Current year Previous year Previous year Amount Percent Amount Percent $4,000,000 (2,280,000) $ $(600,000) (520,000) $ $ (240,000) % % % % % $(648,000) (360,000) % $3,600,000 1,872,000 648,000 360,000 216,000 % % % $3,600,000 (1,872,000) $ $ (216,000) $ b. The vertical analysis indicates that the cost of goods sold as a percent of sales expenses % % % % % % % % % by 3 percentage points. Thus, net income as a percent of sales by 5 percentage points, while selling expenses by 5 percentage points. by 3 percentage points, and administrative
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