Question

Vertical Analysis of Income Statement Revenue and expense data for Searle Technologies Co. are as follows: 20Y8 20Y7 Sales $900,000 $725,000 Cost of goods sold 558,000 435,000 Selling expenses 117,000 116,000 Administrative expenses 63,000 65,250 Income tax expense 76,500 58,000 a. Prepare an income statement in comparative form, stating each item for both 20Y8 and 20Y7 as a percent of sales. Round to one decimal place.

Answer 1

Answer:

Preparation of income statement is shown below:-

Explanation:

                                   Comparative Income Statement

                                  2018              2018         2017             2017

                              Amount         Percent   Amount       Percent

Sales                    $900,000        100.0%  $725,000 100.0%

Less:

Cost of Goods Sold $558,000 62.0% $435,000 60.0%

Gross Profit (A)      $342,000 38.0% $290,000 40.0%

Selling Expense    $117,000        13.0%      $116,000          16.0%

Administrative

Expense                  $63,000           7.0%      $65,250           9.0%

Total Operating

Expense (B)          $180,000     20.0%  $181,250       25.0%

Income from

Operation (A-B)  $162,000  18.0%        $108,750           15.0%

Less: Income

Tax Expense     $76,500     8.5%       $58,000         8.0%

Net Income         $85,500    9.5%     $50,750             7.0%

Formula for Computation of Percentage :- (Cost of Goods Sold or Gross Profit etc. of particular period ÷ Sales for such period)