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Vertical analysis of income statement For 20Y2, Fielder Industries Inc. initiated a sales promotion campaign that included the expenditure of an additional $40,000 for advertising. At the end of the year, Leif Grando, the president, is presented with the following condensed comparative income statement: Fielder Industries Inc. Comparative Income Statement For the Years Ended December 31,20Y2 and 20Y1 20Y2 20Y1 Sales.................... $1,300,000 $1,180,000 Cost of goods sold........ 682,500 613,600 Gross profit.............. $ 617,500 $ 566,400 Selling expenses......... $ 260,000 $ 188,800 Administrative expenses……….. 169,000 177,000 Total operating expenses……….. $ 429,000 $ 365,800 Income from operations…….. $ 188,500 $ 200,600 Other revenue........... 78,000 70,800 Income before income tax $ 266,500 $ 271,400 Income tax expense...... 117,000 106,200 Net income.............. $ 149,500 $ 165,200 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 (I).

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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 17.2BPR
Textbook Problem

Vertical analysis of income statement

For 20Y2, Fielder Industries Inc. initiated a sales promotion campaign that included the expenditure of an additional $40,000 for advertising. At the end of the year, Leif Grando, the president, is presented with the following condensed comparative income statement:

Fielder Industries Inc.

Comparative Income Statement

For the Years Ended December 31,20Y2 and 20Y1

  20Y2 20Y1
Sales.................... $1,300,000 $1,180,000
Cost of goods sold........ 682,500 613,600
Gross profit.............. $ 617,500 $ 566,400
Selling expenses......... $ 260,000 $ 188,800
Administrative expenses……….. 169,000 177,000
Total operating expenses……….. $ 429,000 $ 365,800
Income from operations…….. $ 188,500 $ 200,600
Other revenue........... 78,000 70,800
Income before income tax $ 266,500 $ 271,400
Income tax expense...... 117,000 106,200
Net income.............. $ 149,500 $ 165,200

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 (I).

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Chapter 17 Solutions

Accounting
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