Chapter 15.II, Problem 5TIE

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8th Edition

Robert Brechner + 1 other

ISBN: 9781305585447

Textbook Problem

Prepare a vertical analysis of the income statement for Royal Equipment Supply, Inc., on page 499.

To determine

**To calculate:** The vertical analysis of an income statement for Royal Equipment Supply, Inc. for the year December

Explanation

**Given Information:**

Royal Equipment Supply, Inc.â€™s gross sales are

**Formula used:**

Follow the steps to prepare a vertical analysis of an income statement:

Step

Step

Step

**Calculation:**

Consider gross sales are

Compute the net sales by substituting sales returns and allowances and sales discount and gross sales in the formula:

Compute percentage of gross sales by substituting gross sales and net sales in the formula:

Similarly, calculate each income statement item and enter the results on the income statement by using the steps of vertical analysis;

And, percentage of net sales;

Compute cost of goods sold by substituting merchandise inventory, net purchases, freight in to

And, percentage of good sold is;

Compute gross margin by substituting net sales and cost of goods sold:

And, percentage of gross margin is;

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