Question

Choose one of the income statements and compute the vertical analysis. After computing the vertical analysis, explain what the numbers mean. #1 Sample Products Co. Income Statement For the Five Months Ended May 31, 2017 Revenues & Gains Sales revenues Interest revenues Gain on sales of assets Total revenue & gains $100,000 5,000 3,000 108,000 Expenses & Losses Cost of goods sold Commissions expense Office supplies expense Office equipment expense Advertising expense Interest expense Loss from lawsuit Total expenses & losses 75,000 5,000 3,500 2,500 2,000 500 1,500 90,000 Net Income $ 18,000

Answer 1

Correct Answer:

Sample Products Co.
Income Statement Vertical Analysis
For the Five Months Ended May 31, 2017
Revenues and gains
Sales Revenues	$        1,00,000	92.6%
Interest Revenues	$              5,000	4.6%
Gain on sale of assets	$              3,000	2.8%
Total Revenues & Gain	$        1,08,000	100.0%
Expenses and Losses
Cost of goods sold	$            75,000	69.4%
Commission Expense	$              5,000	4.6%
Office Supplies expense	$              3,500	3.2%
Office equipment expense	$              2,500	2.3%
Advertising expense	$              2,000	1.9%
interest expense	$                  500	0.5%
Loss from lawsuit	$              1,500	1.4%
total Expense an Loss	$            90,000	83.3%
Net Income	$            18,000	16.7%

All the figures are expressed as percentage of total revenues and gain.

Sales Revenues are 92.6 % of Total Revenues and gain rest is made by interest revenues and gain on sale of asset.

Cost of goods sold is 69.4% of total Revenues and gain

Total Expenses and losses are 83.3 % of Total Revenues and gains which also include cogs.

End of answer.

Please give a thumbs-up, it will be highly appreciated.

Thanks.