Vertical Analysis of Income Statement
Revenue and expense data for Innovation Quarter Inc. for tworecent years are as follows:
| CurrentYear | PreviousYear |
| Sales | $567,000 | | $493,000 | |
| Cost of goods sold | 385,560 | | 310,590 | |
| Selling expenses | 73,710 | | 73,950 | |
| Administrative expenses | 79,380 | | 64,090 | |
| Income tax expense | 11,340 | | 19,720 | |
a. Prepare an income statement in comparativeform, stating each item for both years as a percent of sales. Ifrequired, round percentages to one decimal place. Enter all amountsas positive numbers.
| Innovation Quarter Inc. |
| Comparative Income Statement |
| For the Years Ended December 31 |
| Current year Amount | Current year Percent | Previous year Amount | Previous year Percent |
| Sales | $567,000 | % | $493,000 | % |
| Cost of goods sold | 385,560 | % | 310,590 | % |
| $ | % | $ | % |
| Selling expenses | 73,710 | % | 73,950 | % |
| Administrative expenses | 79,380 | % | 64,090 | % |
| $ | % | $ | % |
| | % | | % |
| Income tax expense | 11,340 | % | 19,720 | % |
| $ | % | $ | % |
b. The vertical analysis indicates that thecost of goods sold as a percent of sales ___ by 5 percentagepoints, while selling expenses ___ by 2 percentage points, andadministrative expenses ___ by 1 percentage points. Thus, netincome as a percent of sales ___ by 2 percentage points.
