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Vertical analysis of income statement For 20Y2, Tri-Comic Company initiated a sales promotion campaign that included the expenditure of an additional $50,000 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..................... $1,500,000 $1,250,000 Cost of goods sold........ 510,000 475,000 Gross profit.............. $ 990,000 $ 775,000 Selling expenses......... $ 270,000 $ 200,000 Administrative expenses………. 180,000 156,250 Total operating expenses……….. $ 450,000 $ 356,250 Income from operations…… $ 540,000 $ 418,750 Other revenue........... 60,000 50,000 Income before income tax……… $ 600,000 $ 468,750 Income tax expense....... 450,000 375,000 Net income............... $ 150,000 $ 93,750 Instructions 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. Round percentages to one decimal place. 2. To the extent the data permit, comment on the significant relationships revealed by the vertical analysis prepared in (1).

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Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094
BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

Solutions

Chapter
Section
Chapter 17, Problem 17.2APR
Textbook Problem

Vertical analysis of income statement

For 20Y2, Tri-Comic Company initiated a sales promotion campaign that included the expenditure of an additional $50,000 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..................... $1,500,000 $1,250,000
Cost of goods sold........ 510,000 475,000
Gross profit.............. $ 990,000 $ 775,000
Selling expenses......... $ 270,000 $ 200,000
Administrative expenses………. 180,000 156,250
Total operating expenses……….. $ 450,000 $ 356,250
Income from operations…… $ 540,000 $ 418,750
Other revenue........... 60,000 50,000
Income before income tax……… $ 600,000 $ 468,750
Income tax expense....... 450,000 375,000
Net income............... $ 150,000 $ 93,750

Instructions

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. Round percentages to one decimal place.

2. To the extent the data permit, comment on the significant relationships revealed by the vertical analysis prepared in (1).

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Chapter 17 Solutions

Accounting
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