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P 8-2 Income statement data for Starr Canning Corporation are as follows: 2010 2011 ales Cost of goods sold Selling expenses General expenses Income tax expense $1,200,000 730,000 240,000 100,000 50,000 $1,400,000 850,000 205,000 140,000 82,000 Required a. Prepare an income statement in comparative form, stating each item for both years as a percent of sales (vertical common-size analysis). b. Comment on the findings in (a).
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2011 2010 Percent of Sales 100.0% 60.7% 39.3% 14.6% 10.0% 14.7% 5.9% 8.8% Percent of Sales 100.0% 60.8% 39.2% 20.0% 8.3% 10.9% 4.2% 6.7% Amount Amount Sales Cost of goods sold Gross profit Selling expenses General expenses Income before taxes Income tax expense Net income 1400000 850000 550000 205000 140000 205000 82000 123000 1200000 730000 470000 240000 100000 130000 50000 80000 General expenses, income tax expense as a percent of sa le increased over the year and selling expenses as a percent of sale decreased which is reflected in increase in net income.

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