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

Preparation of income statement is shown below:-

Step-by-step 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)