Vertical Analysis of Income Statement
For 20Y2, Tri-Comic Company initiated a sales promotion campaignthat included the expenditure of an additional $18,000 foradvertising. At the end of the year, Lumi Neer, the president, ispresented with the following condensed comparative incomestatement:
Tri-Comic Company
Comparative Income Statement
For the Years Ended December 31, 20Y2 and 20Y1 20Y2 20Y1 Sales $639,000 $550,000 Cost of goods sold 325,890 308,000 Gross profit $313,110 $242,000 Selling expenses $121,410 $99,000 Administrative expenses 63,900 66,000 Total operating expenses $185,310 $165,000 Income from operations $127,800 $77,000 Other income 19,170 33,000 Income before income tax $146,970 $110,000 Income tax expense 57,510 44,000 Net income $89,460 $66,000
Required:
1. Prepare a comparative income statement forthe two-year period, presenting an analysis of each item inrelationship to sales for each of the years. Enter percentages aswhole numbers. Enter all amounts as positive numbers.
Tri-ComicCompany ComparativeIncome Statement For the YearsEnded December 31, 20Y2 and 20Y1 20Y2 Amount 20Y2 Percent 20Y1 Amount 20Y1 Percent Sales $639,000 % $550,000 % Cost of goods sold 325,890 % 308,000 % Gross profit $313,110 % $242,000 % Selling expenses 121,410 % 99,000 % Administrative expenses 63,900 % 66,000 % Total operating expenses $185,310 % $165,000 % Income from operations $127,800 % $77,000 % Other income 19,170 % 33,000 % Income before income tax $146,970 % $110,000 % Income tax expense 57,510 % 44,000 % Net income $89,460 % $66,000 %
2. The vertical analysis indicates that thecosts other than selling expenses (cost of goods sold andadministrative expenses) as a percentage of sales. As a result, netincome as a percentage of sales . The sales promotion campaignappears to have been . While selling expenses as a percent of salesslightly, the cost was more than made up for by sales.
Vertical Analysis of Income Statement
For 20Y2, Tri-Comic Company initiated a sales promotion campaignthat included the expenditure of an additional $18,000 foradvertising. At the end of the year, Lumi Neer, the president, ispresented with the following condensed comparative incomestatement:
Tri-Comic Company Comparative Income Statement For the Years Ended December 31, 20Y2 and 20Y1 | |||
20Y2 | 20Y1 | ||
Sales | $639,000 | $550,000 | |
Cost of goods sold | 325,890 | 308,000 | |
Gross profit | $313,110 | $242,000 | |
Selling expenses | $121,410 | $99,000 | |
Administrative expenses | 63,900 | 66,000 | |
Total operating expenses | $185,310 | $165,000 | |
Income from operations | $127,800 | $77,000 | |
Other income | 19,170 | 33,000 | |
Income before income tax | $146,970 | $110,000 | |
Income tax expense | 57,510 | 44,000 | |
Net income | $89,460 | $66,000 |
Required:
1. Prepare a comparative income statement forthe two-year period, presenting an analysis of each item inrelationship to sales for each of the years. Enter percentages aswhole numbers. Enter all amounts as positive numbers.
Tri-ComicCompany | ||||
ComparativeIncome Statement | ||||
For the YearsEnded December 31, 20Y2 and 20Y1 | ||||
20Y2 Amount | 20Y2 Percent | 20Y1 Amount | 20Y1 Percent | |
Sales | $639,000 | % | $550,000 | % |
Cost of goods sold | 325,890 | % | 308,000 | % |
Gross profit | $313,110 | % | $242,000 | % |
Selling expenses | 121,410 | % | 99,000 | % |
Administrative expenses | 63,900 | % | 66,000 | % |
Total operating expenses | $185,310 | % | $165,000 | % |
Income from operations | $127,800 | % | $77,000 | % |
Other income | 19,170 | % | 33,000 | % |
Income before income tax | $146,970 | % | $110,000 | % |
Income tax expense | 57,510 | % | 44,000 | % |
Net income | $89,460 | % | $66,000 | % |
2. The vertical analysis indicates that thecosts other than selling expenses (cost of goods sold andadministrative expenses) as a percentage of sales. As a result, netincome as a percentage of sales . The sales promotion campaignappears to have been . While selling expenses as a percent of salesslightly, the cost was more than made up for by sales.