Question

Sports Emporium has two operating segments: sporting goods and sports apparel. The income statement for each operating segment is presented below Required 1. Complete the"%" columns to be used in a vertical analysis of Sports Emporium's two operating segments. Express each amount as a prcentage of sales. Round your answers to 1 decimal place.) SPORTS EMPORIUM Income Statement For the Year Ended December 31, 2018 Sporting Goods Sports Apparel Amount $1.800,000 1,040,000 760,000 450,000 310,000 20,000 330,000 80,000 $250,000 $ 970,000 440,000 530,000 340,000 190,000 (15,000) 175,000 70,000 $105,000 Net sales Cost of goods sold Gross profit Operating expenses Operating income Other income (expense) Income before tax Incorme tax expense Net income 2. Use vertical analysis to compare the profitability of the two operating segments. Which segment has a higher net income as a percentage of net sales? Sporting Goods Sports Apparel

Help!

Answer 1

Requirement 1

SPORTS EMPORIUM
Income statement
For the year ended December 31, 2018
	Sporting goods		Sports Apparel
	Amount	%	Amount	%
Net sales	$ 1,800,000	100.0%	$ 970,000	100.0%
Cost of goods sold	$ 1,040,000	57.8%	$ 440,000	45.4%
Gross profit	$ 760,000	42.2%	$ 530,000	54.6%
Operating expenses	$ 450,000	25.0%	$ 340,000	35.1%
Operating income	$ 310,000	17.2%	$ 190,000	19.6%
Other income (expense)	$ 20,000	1.1%	-$ 15,000	-1.5%
Income before tax	$ 330,000	18.3%	$ 175,000	18.0%
Income tax expense	$ 80,000	4.4%	$ 70,000	7.2%
Net income	$ 250,000	13.9%	$ 105,000	10.8%

Requirement 2

Answer---Sporting goods

Sporting good shave higher net income to sales in comparison to Sports apparel.