Question

question #1

Instructions Income Statement Final Question Instructions Revenue and expense data for Innovation Quarter Inc. for two recent years are as follows: Sales Cost of goods sold Selling expenses Current Year $ 2,060,000 1,277,200 238,960 329,600 123,600 Previous Year $3,000,000 1,644,000 456,000 360,000 150,000 Administrative expenses Income tax expense A. Prepare an income statement in comparative form, stating each item for both years as a percent of sales. Round your percentages answers to one decimal place. Enter all amounts as positive numbers. B. Comment on the significant changes disclosed by the comparative income statement

Answer 1

Sales Cost of goods sold Gross profit Selling expenses Administrative expenses Total operating expenses Income from operations Income tax expense Net income Innovation Quarter Inc. Comparative Income Statement For the Years Ended December 31 Current Year Previous Year Amount Percent Amount Percent $ 2,060,000 100.0% $ 3,000,000 100.0% $ 1,277,200 62.0% $ 1,644,000 54.8% $ 782,800 38.0% $ 1,356,000 45.2% 238,960 11.6% $ 456,000 15.2% $ 329,600 16.0% $ 360,000 12.0% $ 568,560 27.6% $ 816,000 27.2% $ 214,240 10.4% $ 540,000 18.0% $ 123,600 6.0% $ 150,000 5.0% $ 90,640 4.4% $ 390,000 13.0% The vertical analysis indicates that the cost of goods sold as a percent of sales increased by 7.20 percentage points, while selling expenses decreased by 3.60 percentage points, and administrative expenses increased by 4.00 percentage points. Thus, net income as a percent of sales 8.60 percentage points.