Revenue and expense data for Innovation Quarter Inc. for two recent years are as follows:Current Year Previous YearSales $4,000,000 $3,600,000Cost of goods sold 2,280,000 1,872,000Selling expenses 600,000 648,000Administrative expenses 520,000 360,000Income tax expense 240,000 216,000a. Prepare an income statement in comparative form, stating each item for both years as a percent of sales. If required, round percentages to one decimal place. Enter all amounts as positive numbers.

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Revenue and expense data for Innovation Quarter Inc. for two recent years are as follows:Current Year Previous YearSales $4,000,000 $3,600,000Cost of goods sold 2,280,000 1,872,000Selling expenses 600,000 648,000Administrative expenses 520,000 360,000Income tax expense 240,000 216,000a. Prepare an income statement in comparative form, stating each item for both years as a percent of sales. If required, round percentages to one decimal place. Enter all amounts as positive numbers.

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Gabriela Downs · Answer 1

Innovation Quarter Inc. - Common Size Income Statement

Previous Year Current Year

Sales 100% 100%

Cost of Goods sold 52% 57%

Gross Profit 48% 43%

Operating Expenses

Selling Expense 18% 15%

Administrative Expense 10% 13%

Total Operating Expense 28% 28%

Profit Before Tax 20% 15%

Income Tax 6% 6%

Profit After Tax 14% 9%

Explanation:

This is basically known as common sizing where each item in the financial statement is represented as a percentage of a base item. For income statement it is usually revenue and for statement of financial position (balance sheet) it is total asset and total liabilities.