Revenue and expense data for Innovation Quarter Inc. for two recent years are as follows: The reporting statement of revenue and expense data is shown. A table with three columns is shown. There is no heading in the first column; the second column heading in the current year; the third column heading is the previous year. The headings, Current Year and Previous Year, are set in bold. The first line (below the heading) shows Sales is $ 4,000,000 and $ 3,600,000; the second line shows Cost of goods sold is 2,280,000 and 1,872,000; the third line shows Selling expenses is 600,000 and 648,000; the fourth line shows Administrative expenses is 520,000 and 360,000;the fifth line shows Income tax expense is 240,000 and 216,000. Prepare an income statement in comparative form, stating each item for both years as a percent of sales. Round to the nearest whole percentage. Answer Check Figure: Current year net income: $360,000; 9% of sales Pencil Comment on the significant changes disclosed by the comparative income statement.

Innovation Quarter Inc.

Income Statement

For the Years Ended

                                         Current Year ($)            Previous Year  ($)

Sales                            4,000,000100%3,600,000100%

Cost of goods sold    2,280,00057%          1,872,00052%

Gross profit                    1,720,00043%          1,728,00048%

Expenses:    

Selling expenses             600,00015%    648,00018%

Administrative expenses   520,00013%    360,00010%

Total expenses             1,120,00028%           1,008,00028%

Income from operations    600,00015%            720,00020%

Income tax expense     240,0006%            216,0006%

Net income                      360,0009%            504,00014%

Explanation:

                                            Current Year              Previous Year

Sales                                  $ 4,000,000               $ 3,600,000

Cost of goods sold             $ 2,280,000                $ 1,872,000

Selling expenses                $ 600,000                    $ 648,000

Administrative expenses    $ 520,000                    $ 360,000

Income tax expense            $ 240,000                    $ 216,000

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