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Financial Accounting
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:
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).
1)
Prepare comparative income statement for the two-year period.
Vertical Analysis
Vertical analysis is prepared to analyze the relationship among various financial statements with a particular base amount.
Formula:
This analysis is otherwise called as common-size statement.
Prepare comparative income statement for the years ended December 31, 20Y2 and 20Y1.
|
T Company Comparative Income Statement for the Years Ended December 31, 20Y2 and 20Y1 | ||||
| Â | 20Y2 | 20Y1 | ||
| Amount | Percent | Amount | Percent | |
| Â | ( $) | (%) | ( $) | (%) |
| Sales | 1,500,000 | 100 | ||
2)
Comment on the significant relationships revealed by the horizontal analysis.
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