Sunshine Farm Supply Following are selected data from the financial statements of Sunshine Farm Supply:
Refer to the data for Sunshine Farm Supply.
Which of the following would result from a vertical analysis of its income statement?
A)Accounts receivable increased $22,000 or 57.9% during 2012.
B)Gross profit is 57.9% of net sales for 2012.
C)Cost of goods sold increased $50,000 or 23.8% during 2012.
D)Net sales increased $110,000 or 28.9% during 2012.

Question

Sunshine Farm Supply Following are selected data from the financial statements of Sunshine Farm Supply:
 Refer to the data for Sunshine Farm Supply.
Which of the following would result from a vertical analysis of its income statement?
A)Accounts receivable increased $22,000 or 57.9% during 2012. 
B)Gross profit is 57.9% of net sales for 2012. 
C)Cost of goods sold increased $50,000 or 23.8% during 2012. 
D)Net sales increased $110,000 or 28.9% during 2012.

Quizplus · Accepted Answer

Vertical analysis expresses each item on the income statement as a percentage of net sales. Therefore, the only option that relates to the calculation of percentages is option B, which states that gross profit is 57.9% of net sales for 2012. The other options relate to dollar amounts or percentage changes in dollar amounts, which are not relevant to a vertical analysis of the income statement.

Sunshine Farm Supply Following Are Selected Data from the Financial