Vertical Analysis

EX (1): Operating data for Krystal Corporation are presented below.

December 31, 2013 December 31, 2012
Net sales $750,000 $600,000
Cost of goods sold 465,000 390,000
Selling expenses 120,000 72,000
Administrative expenses 60,000 54,000
Income tax expense 30,000 24,000
Net income 75,000 60,000

Instructions
Prepare a schedule showing a vertical analysis for 2013 and 2012.

Solution
2012 2013
Particulars Amount Percent Amount Percent
Net sales $600,000 100% $750,000 100%
Cost of goods sold 390,000 65% 465,000 62%
Gross profit 210,000 35% 285,000 38%
Period expenses:
Selling exp. 72,000 12% 120,000 16%
Administrative exp. 54,000 9% 60,000 8%
Income before tax 84,000 14% 105,000 14%
Tax exp. 24,000 4% 30,000 4%
Net income 60,000 10% 75,000 10%

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EX (2): The comparative condensed balance sheets of Monero Corporation are
presented below.
MONERO CORPORATION
Comparative Condensed Balance Sheets
For the Years Ended December 31

2013 2012
Assets:
Current assets $74,000 $80,000
Property, plant, and equipment (net) 99,000 90,000
Intangibles 27,000 40,000
Total assets $200,000 $210,000
Liabilities and stockholders’ equity
Current liabilities $42,000 $48,000
Long-term liabilities 143,000 150,000
Stockholders’ equity 15,000 12,000
Total liabilities and stockholders’ equity $200,000 $210,000

Instructions
Prepare a vertical analysis of the balance sheet data for Monero Corporation in
columnar form for 2013.

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Solution
2013
Particulars Amount Percent
Assets
Current assets $74,000 37%
Property, plant, and equipment (net) 99,000 49.5%
Intangibles 27,000 13.5%
Total assets $200,000 100%
Liabilities and stockholders’ equity
Current liabilities $42,000 21%
Long-term liabilities 143,000 71.5%
Stockholders’ equity 15,000 7.5%
Liabilities and stockholders’ equity $200,000 100%

EX (3): The comparative condensed income statements of Indra Corporation are

shown below.
INDRA CORPORATION
Comparative Condensed Income Statements
For the Years Ended December 31

2013 2012
Sales $750,000 $650,000
Sales returns and allowances 150,000 150,000
Net sales 600,000 $500,000
Cost of goods sold 483,000 $420,000
Gross profit 117,000 80,000
Operating expenses 57,200 44,000
Net income $59,800 $36,000

Instructions
Prepare a vertical analysis of the income statement data for Indra Corporation in
columnar form for both years.

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Solution
2012 2013
Particulars Amount Percent Amount Percent
Sales $650,000 130% $750,000 125%
Sales returns and allowances 150,000 30% 150,000 25%
Net sales 500,000 100% 600,000 100%
Cost of goods sold 420,000 84% 483,000 80.5%
Gross profit 80,000 16% 117,000 19.5%
Operating expenses 44,000 8.8% 57,200 9.53%
Net income $36,000 7.2% $59,800 9.97%

EX (4): The following is a comparative income statement for Poco Co. as December
31, 2019 and 2020.
2019 2020
Particulars Amount Percent Amount Percent
Sales $500,000 ? ? 120%
Sales returns and allowances ? 25% 120,000 ?
Net sales ? ? ? ?
Cost of goods sold ? ? ? 40%
Gross profit ? 50% ? ?
Operating expenses ? ? 144,000 ?
Net income ? 20% ? ?

Instructions
Fill the missing data using vertical analysis method.

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Solution
2019 2020
Particulars Amount Percent Amount Percent
Sales $500,000 125% $720,000 120%
Sales returns and allowances 100,000 25% 120,000 20%
Net sales 400,000 100% 600,000 100%
Cost of goods sold 200,000 50% 240,000 40%
Gross profit 200,000 50% 360,000 60%
Operating expenses 120,000 30% 144,000 24%
Net income 80,000 20% 216,000 36%

Notes:
(1) In 2019, we compute net sales as follows: $500,000 / 1.25
(2) In 2020, we compute total sales as follows: $120,000 × 120/20