(--> 01www ALEK The following information was obtained from the income statement

Question

(--> 01www ALEK The following information was obtained from the income statements of Morgan Company and Sanders Company to be used n vertical analysis Incone I Stalement For Year Ended December 31, 2016 Sales Cost of Gioods Sold Gross Profit Operating Expense lncome before Taxes Income Tax Expense Net Income Morgan Company Sanders Company S 1,100,000 605,000 495,000 329,100 165,900 9,724 $ 106,176 $2,750,000 1,375,000 1,375,000 962,500 412,500 148,500 $264,000 Required: 1. Compute Morgan Company's Income before taxes as a percentage of sales. 2. Compute Sanders Company's Income before taxes as a percentage of sales. Round your responses to two decimal places 1. Morgan Company 2 Sanders Company 0% Help Clear Undo Type here to search

Explanation / Answer

Solution: 1 Morgan Company 15.00% 2. Sanders Company 15.08% Working Notes: Income before taxes as % of sales Morgan Company = (Morgan's income before taxes / Sales) x 100 % = ($412,500/$2,750,000) x 100% = 15.00 % Sanders Company = (Sanders's income before taxes / Sales) x 100 % = ($165,900/$1,100,000) x 100% = 15.0818181 % = 15.08 % Please feel free to ask if anything about above solution in comment section of the question.

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