Perform a Vertical Analysis for the Entry "Sales Returns and Allowances

question 99

Multiple Choice

Perform a vertical analysis for the entry "Sales Returns and Allowances" on the portion of an income statement shown below. (Round to the nearest tenth) $$\begin{array} { l l } \text { Revenue } & \\\text { Gross Sales } & \$ 288,000 \\\text { Less: Sales Returns and Allowances } & 7,600 \\\text { Net Sales } & 280,400 \\\text { Cost of Good Sold } & \\\text { Merchandise Inventory, Jan. } 1 & 47,500 \\\text { Net purchases } & 64,300 \\\text { Goods Available for Sale } & 112,375 \\\text { Less: Merchandise Inventory, Dec. } 31 & 77,800 \\\text { Cost of Goods Sold } & 34,575 \\\text { Gross Margin } & \$ 245,825\end{array}$$

• A) 2.6%
• B) 2.7%
• C) 3.9%
• D) 3.1%

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Definitions:

Cash Dividends

A portion of a company's earnings that is paid out to shareholders, typically in the form of cash.

Investing Activities

Activities related to the acquisition and disposal of long-term assets and other investments not included in cash equivalents.

Comparative Balance Sheet

A financial statement that presents a company's financial position at different times, side by side, to allow for performance comparison.

Cash Dividends

Payments made by a company from its earnings to its shareholders in the form of cash.