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 percentage of sales. (Round your answers to 1 decimal place.) Net sales Cost of goods sold Gross profit Operating expenses Operating income Other income (expense) Income before tax Income tax expense Net income SPORTS EMPORIUM Income Statement For the Year Ended December 31, 2018 Sporting Goods Sports Apparel Amount % Amount % $ 1,875,000 $ 1,000,000 1,070,000 455,000 805,000 545,000 480,000 370,000 325,000 175,000 21,500 (16,500) 346,500 158,500 83,000 73,000 $ 263,500 | $ 85,500 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

Answer 1

Requirement: 1 Sports Emporium Income Statements For the years Ended December 31, 2018 Sporting Goods Sports Apparel Amount % Amount % Net Sales 1875000 100.0 % 1000000 100.0% Cost of Goods sold 1070000 57.1 % 455000 45.5 % Gross Profit 805000 42.9 % 545000 54.5% Operating expenses 480000 25.6% 370000 37.0 % Operating Income 325000 17.3% 175000 17.5 % Other income (expenses) 21500 1.1 % - 16500 -1.7 % Income before tax 346500 18.5 % 158500 15.9% Income Tax Expense 83000 4.4 % 73000 7.3% Net Income 263500 14.1% 85500 8.6 % Requirement: 1 Sporting Goods