Question

Vertical Analysis of Income Statement

For 20Y2, Tri-Comic Company initiated a sales promotion campaign that included the expenditure of an additional $19,000 for advertising. At the end of the year, Lumi Neer, the president, is presented with the following condensed comparative income statement:

Tri-Comic Company Comparative Income Statement For the Years Ended December 31, 20Y2 and 20Y1
	20Y2		20Y1
Sales	$680,000		$585,000
Cost of goods sold	326,400		310,050
Gross profit	$353,600		$274,950
Selling expenses	$129,200		$105,300
Administrative expenses	68,000		70,200
Total operating expenses	$197,200		$175,500
Income from operations	$156,400		$99,450
Other revenue	34,000		35,100
Income before income tax	$190,400		$134,550
Income tax expense	74,800		52,650
Net income	$115,600		$81,900

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. Enter percentages as whole numbers. Enter all amounts as positive numbers.

Tri-Comic Company
Comparative Income Statement
For the Years Ended December 31, 20Y2 and 20Y1
	20Y2 Amount	20Y2 Percent	20Y1 Amount	20Y1 Percent
Sales	$680,000	%	$585,000	%
Cost of goods sold	326,400	%	310,050	%
Gross profit	$353,600	%	$274,950	%
Selling expenses	$129,200	%	$105,300	%
Administrative expenses	68,000	%	70,200	%
Total operating expenses	$197,200	%	$175,500	%
Income from operations	$156,400	%	$99,450	%
Other revenue	34,000	%	35,100	%
Income before income tax	$190,400	%	$134,550	%
Income tax expense	74,800	%	52,650	%
Net income	$115,600	%	$81,900	%

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Answer 1