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%

Question

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%

Quizplus · Accepted Answer

To perform a vertical analysis of "Sales Returns and Allowances," divide the amount of Sales Returns and Allowances ($7,600) by Gross Sales ($288,000) and multiply by 100 to convert to a percentage: $ \frac{7,600}{288,000} \times 100 = 2.64\%$, which rounds to 2.7%.

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