Knowledge Check 01 Provided below is summary income statement data for Freedom Corporation. Amount Sales $ 800,000 Cost of goods sold 350,000 Operating expenses 180,000 Other expense 30,000 Income tax expense 20,000 Net income $ 220,000 Using vertical analysis, what percentage is applicable to Cost of Goods Sold? Multiple Choice 35.0% 43.8% 56.2% 62.9%

Question

Leanna Ball

Business

3 August, 11:35

Knowledge Check 01 Provided below is summary income statement data for Freedom Corporation. Amount Sales $ 800,000 Cost of goods sold 350,000 Operating expenses 180,000 Other expense 30,000 Income tax expense 20,000 Net income $ 220,000 Using vertical analysis, what percentage is applicable to Cost of Goods Sold? Multiple Choice 35.0% 43.8% 56.2% 62.9%

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Answers (1)

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Eliana Gordon · Answer 1

43.8% (approx)

Explanation:

Given that,

Sales = $800,000

Cost of goods sold = 350,000

Operating expenses = 180,000

Other expense = 30,000

Income tax expense = 20,000

Net income = $ 220,000

Here, we are using vertical analysis,

Percentage is applicable to Cost of Goods Sold:

= (Cost of goods sold : Sales) * 100

= ($350,000 : $800,000) * 100

= 0.4375 * 100

= 43.75% or 43.8% (approx)