Taylor Company reported the following information for the current year: What would a vertical analysis report with respect to current year income tax expense?

Question

Taylor Company reported the following information for the current year:  What would a vertical analysis report with respect to current year income tax expense?

Quizplus · Accepted Answer

Vertical analysis involves expressing each item in the financial statement as a percentage of a base amount. In this case, the current year income tax expense would be expressed as a percentage of net sales revenue. Based on the given information, income tax expense is $200,000, and net sales revenue is $10,000,000. Therefore, income tax expense is 2.00% of net sales revenue (200,000/10,000,000 = 0.02 or 2.00%). None of the other answer choices are supported by the given information.

Taylor Company Reported the Following Information for the Current Year