2. Sample Problems Exercises 23.1 and 23.3

3. Exercise 23.1 and 23.3 both use the following comparative income statement:.

4. Exercise 23.1 Using the comparative income statement, prepare a vertical analysis of all items from sales through gross profit on sales for the years 2007 and 2008 Click for sound: 20082007 Sales1,340,000107.2%1,250,000104.2% Less sales returns & allowances 90,0007.2%50,0004.2% Net sales 1,250,000100%1,200,000100% COGS750,00060%760,00063.3% Gross profit on sales 500,00040%440,00036.7%

5. Exercise 23.3 Using the comparative income statement, prepare a horizontal analysis of all items on the income statement for 2008 and 2007. 20082007ChangePercent Sales1,340,0001,250,00090,0007.2% Less ret.&all. 90,00050,00040,00080% Net sales 1,250,0001,200,00050,0004.2% COGS750,000760,000-10,000-1.3% Gross profit 500,000440,00060,00013.6% Selling exp. 145,000130,00015,00011.5% General exp. 185,000180,0005,0002.8% Total exp. 330,000310,00020,0006.5% Net income before tax 170,000130,00040,00030.8% Income tax exp. 59,50045,50014,00030.8% Net income after income tax 110,50084,50026,00030.8%