Question

Here are comparative statement data for Pharoah Company and Cullumber Company, two competitors. All balance sheet data are as of December 31, 2017, and December 31, 2016.

Pharoah Company				Cullumber Company
		2017		2016		2017		2016
Net sales		$1,922,000				$561,000
Cost of goods sold		1,084,000				291,000
Operating expenses		256,000				85,000
Interest expense		6,800				2,500
Income tax expense		68,600				32,000
Current assets		704,106		$674,806		180,006		$ 171,649
Plant assets (net)		1,137,888		1,080,000		301,812		271,754
Current liabilities		143,262		163,760		76,352		65,407
Long-term liabilities		246,218		194,400		63,979		54,000
Common stock, $10 par		1,080,000		1,080,000		259,200		259,200
Retained earnings		372,514		316,645		82,287		64,796

Prepare a vertical analysis of the 2017 income statement data for Pharoah Company and Cullumber Company. (Round all ratios to 1 decimal place, e.g. 2.5%.)

Condensed Income Statement For the Year Ended December 31, 2017 Pharoah Company Cullumber Company Dollars Percent Dollars Percent $1,922,000 % $561,000 % 1,084,000 % 291,000 % 838,000 % 270,000 % 256,000 % 85,000 % 582,000 % 185,000 % 6,800 % 2,500 % 575,200 % 182,500 % 68,600 % 32,000 % $506,600 % $150,500 %

Options for first column

Retained Earnings, December 31, Net Sales, Sales Revenues, Gross Profit, Other Expenses and Losses, Operating Expenses, Retained Earnings, January 1O, ther Revenues and Gains, Total Operating Expenses, Income Before Income Taxes, Income From Operations, Cost of Goods Sold, Interest Expense, Income Tax Expense, Dividends, Expenses, Net Income / (Loss)Total Revenues, Total Expenses

Answer 1

Solution

Condenced Income Statement
Vertical Analysis
	Pharoah Company		Cullumber Company
	Dollars	Percent	Dollars	Percent
Net sales	$ 19,22,000.00	100.0%	$ 5,61,000.00	100.0%
Cost of goods sold	$ 10,84,000.00	56.4%	$ 2,91,000.00	51.9%
Gross Profit	$    8,38,000.00	43.6%	$ 2,70,000.00	48.1%
Operating expenses	$    2,56,000.00	13.3%	$      85,000.00	15.2%
Operating Income	$    5,82,000.00	30.3%	$ 1,85,000.00	33.0%
Other Expenses
Interest expense	$          6,800.00	0.4%	$        2,500.00	0.4%
Income before Income Taxes	$    5,75,200.00	29.9%	$ 1,82,500.00	32.5%
Income tax expense	$        68,600.00	3.6%	$      32,000.00	5.7%
Net Income/ (Loss)	$    5,06,600.00	26.4%	$ 1,50,500.00	26.8%