Question

Comparative income statement data for Oriole Inc. and Cheyenne Ltd., two competitors, are shown below for the year ended December 31, 2021.

		Oriole		Cheyenne
Net sales		$2,170,000		$540,000
Cost of goods sold		1,226,050		342,360
Gross profit		943,950		197,640
Operating expenses		564,200		86,400
Profit from operations		379,750		111,240
Interest expense		6,080		1,252
Profit before income tax		373,670		109,988
Income tax expense		112,101		27,497
Profit		$261,569		$82,491

Additional information:
Average total assets		$977,000		$333,563
Average total shareholders’ equity		796,000		257,808

(a)

Using vertical analysis, calculate the percentage of the base amount of the income statement for each company. (Round answers to 1 decimal place, e.g. 12.5%.)

ORIOLE AND CHEYENNE COMPANIES Income Statements                                                                       December 31, 2021Month Ended December 31, 2021Year Ended December 31, 2021
		Oriole			Cheyenne
		Percent			Percent
Net sales			%			%
Cost of goods sold			%			%
Gross profit			%			%
Operating expenses			%			%
Profit from operations			%			%
Interest expense			%			%
Profit before income tax			%			%
Income tax expense			%			%
Profit			%			%

Answer 1

Vertical analysis of the income statement:

Particulars	Oriole company		Cheyenne company
Dec 31,2021 Year ended	%	Dec 31,2021 Year ended	%
Net sales	2170000	100%	540000	100%
Cost of goods sold	1226050	56.5%	342360	63.4%
Gross profit	943950	43.5%	197640	36.6%
operating expenses	564200	26.0%	86400	16.0%
profit form operations	379750	17.5%	111240	20.6%
interest expense	6080	0.3%	1252	0.2%
profit before income taxes	373670	17.2%	109988	20.4%
income tax expenses	112101	5.2%	27497	5.1%
Profit	261569	12.1%	82491	15.3%