Osgood Company Provided the Following Income Statement for Year 1

question 42

Essay

Osgood Company provided the following income statement for Year 1 and Year 2:
$\begin{array}{lrr}&\text { Year } 2 & \text { Year } 1\\\text { Sales } & \$ 220,000 & \$ 160,000 \\\text { Cost of goods sold } & 156,000 & 105,000 \\\text { Gross margin } & 64,000 & 55,000 \\\text { Less operating expenses: } & &\\\\\text { Selling and administrative expenses } & 26,000 & 15,000 \\\text { Interest expense } & 2,000 & 3,000 \\\text { Income before tax } & 36,000 & 37,000 \\\text { Income tax expense } & 10,800 & 11,100 \\\text {Net income } & \$ 25,200 & \$ 25,900\end{array}$ Required: Perform vertical analysis on Osgood's income statements for Year 1 and Year 2. Round your answer to one decimal place (i.e., 22.4%).Comment on the results, comparing Year 1 to Year 2.

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Definitions:

Double-Entry Bookkeeping System

An accounting technique which records each transaction in two accounts, ensuring the total debits equal total credits.

Fully Integrated Ledger System

A fully integrated ledger system is an accounting system where all the different financial and accounting records are comprehensively interconnected and maintained within a single framework.

Financial Transactions

The process of exchanging assets, settling debts, or conducting monetary dealings between parties.

Accounts Receivable

Funds that a business's customers have yet to pay for products or services received from the business.