Prepare a vertical analysis of the 2017 income statement data for Crane Company and Sheridan Company. (Round all ratios to 1 decimal place, e.g. 2.5%.)Condensed Income StatementFor the Year Ended December 31, 2017Sheridan CompanyCrane CompanyDollarsDollarsPercentPercent$1,855,000$596,000Net Sales100 %100 %1,063,000291,00057.3 %48.8 %Cost of Goods Sold792,000305,000Gross Profit42.7 %51.2 %265,00089,00014.3 %14.9 %Operating Expenses527,000216,000Income From Operations28.4%36.2 %Other Expenses and Losses8,6003,200Interest Expense0.5 %0.5 %X518,400212,80028.9%35.7 %Income Before Income Taxes74,90035,000Income Tax Expense4.0 %5.9 %X$443,500$177,80024.8 %29.8 %Net Income / (Loss)

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Asked Jun 15, 2019
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Prepare a vertical analysis of the 2017 income statement data for Crane Company and Sheridan Company. (Round all ratios to 1 decimal place, e.g. 2.5%.)
Condensed Income Statement
For the Year Ended December 31, 2017
Sheridan Company
Crane Company
Dollars
Dollars
Percent
Percent
$1,855,000
$596,000
Net Sales
100 %
100 %
1,063,000
291,000
57.3 %
48.8 %
Cost of Goods Sold
792,000
305,000
Gross Profit
42.7 %
51.2 %
265,000
89,000
14.3 %
14.9 %
Operating Expenses
527,000
216,000
Income From Operations
28.4%
36.2 %
Other Expenses and Losses
8,600
3,200
Interest Expense
0.5 %
0.5 %
X
518,400
212,800
28.9%
35.7 %
Income Before Income Taxes
74,900
35,000
Income Tax Expense
4.0 %
5.9 %
X
$443,500
$177,800
24.8 %
29.8 %
Net Income / (Loss)
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Prepare a vertical analysis of the 2017 income statement data for Crane Company and Sheridan Company. (Round all ratios to 1 decimal place, e.g. 2.5%.) Condensed Income Statement For the Year Ended December 31, 2017 Sheridan Company Crane Company Dollars Dollars Percent Percent $1,855,000 $596,000 Net Sales 100 % 100 % 1,063,000 291,000 57.3 % 48.8 % Cost of Goods Sold 792,000 305,000 Gross Profit 42.7 % 51.2 % 265,000 89,000 14.3 % 14.9 % Operating Expenses 527,000 216,000 Income From Operations 28.4% 36.2 % Other Expenses and Losses 8,600 3,200 Interest Expense 0.5 % 0.5 % X 518,400 212,800 28.9% 35.7 % Income Before Income Taxes 74,900 35,000 Income Tax Expense 4.0 % 5.9 % X $443,500 $177,800 24.8 % 29.8 % Net Income / (Loss)

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Expert Answer

Step 1

Vertical analysis is generally done to express the relative sizes of the different accounts reported on the financial statements based on a particular account. For income statement, sales amount would be taken as base figure. Thus, the vertical analysis on the income statement is prepared to show the relative percentage of each other account based on net sales amount. 

Formula to be used for vertical analysis on income statement:

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Individual item of an income In dividual item in dollars x100 statem ent as a Net sales in dollars percentage of net sales

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Step 2

Determine income before income taxes as a percentage of net sales for Crane Company.

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Income before income taxes as a Income before income taxes in dollars x100 percentage ofnet sales for Crane Company Net sales in dollars $518,400 -x 1 00 $1,855.000 =27.9%

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Step 3

Determine net income / (Loss) as a percent...

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Net income (Loss) percentage Net income (Loss) in dollars x100 as a of n et sales for Crane Company Net sales in dollars $443,500100 x $1,855,000 =23.9%

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