**Exercise 12-2 (Algo) Prepare Vertical Analysis (LO12-1)**The income statements for Federer Sports Apparel for 2025 and 2024 are presented below.**Required:**Prepare a vertical analysis of the data for 2025 and 2024. *(Round your percentage answers to 1 decimal place.)*---**FEDERER SPORTS APPAREL****Income Statement****For the Years Ended December 31**| | **2025** | | **2024** | ||---------------------|-------------------|----------|-----------------|----------|| | **Amount** | **%** | **Amount** | **%** || **Net sales** | $18,200,000 | | $14,900,000 | || **Cost of goods sold** | 13,431,600 | | 6,645,400 | || **Gross profit** | 4,768,400 | | 8,254,600 | || **Operating expenses** | 1,437,800 | | 1,057,900 | || **Depreciation expense** | 855,400 | | 879,100 | || **Inventory write-down** | 91,000 | | 0 | || **Loss (litigation)** | 1,346,800 | | 268,200 | || **Income before tax** | 1,037,400 | | 6,049,400 | || **Income tax expense** | 327,600 | | 1,832,700 | || **Net income** | $709,800 | | $4,216,700 | |---### Explanation of Vertical AnalysisVertical analysis involves expressing each item on the financial statement as a percentage of a base figure. In income statements, sales are typically used as the base. This analysis allows for easier comparison over different periods by highlighting the relative size of each expense category or profit margin, facilitating the assessment of financial health and operational efficiency across different years.

VERTICAL ANALYSIS OF BALANCE SHEETVertical analysis is a proportional analysis of financial statements. Vertical Analysis is a form of financial statement analysis where the line items on a company’s income statement or balance sheet is expressed as a percentage of a base figure.In Vertical Analysis of balance sheet base figure is always Total Assets or Total Liabilities.In Vertical Analysis of Income Statement base figure is always Total Revenue or Total Sales.Vertical Analysis formula for Balance sheet= (Balance Sheet Item ÷ Total Assets) * 100Vertical Analysis formula for Income Statement= (Income Statement Item ÷ Total Sales Revenue) * 100 FEDERER SPORTS APPERALIncome Statement For the Year Ended December 31 20252024Amount%Amount%A[(A÷Net Sales)*100]B[(B÷ Net Sales)*100]Net Sales$18,200,000100%$14,900,000100%Cost of Goods Sold$13,431,60073.8%$6,645,40044.6%Gross Profit$4,768,40026.2%$8,254,60055.4%Operating Expenses$1,437,8007.9%$1,057,9007.1%Depreciation Expense$855,4004.7%$879,1005.9%Inventory Write Down$91,0000.5%0NALoss (Litigation)$1,346,8007.4%$268,2001.8%Income Before Tax$1,037,4005.7%$6,049,40040.6%Income Tax Expense$327,6001.8%$1,832,70012.3%Net Income $709,8003.9%$4,216,70028.3%REQUIREMENT # :— FINAL ANSWERRequirement #1 :— FEDERER SPORTS APPERALIncome Statement For the Year Ended December 31 20252024Amount%Amount%Net Sales$18,200,000100%$14,900,000100%Cost of Goods Sold$13,431,60073.8%$6,645,40044.6%Gross Profit$4,768,40026.2%$8,254,60055.4%Operating Expenses$1,437,8007.9%$1,057,9007.1%Depreciation Expense$855,4004.7%$879,1005.9%Inventory Write Down$91,0000.5%0NALoss (Litigation)$1,346,8007.4%$268,2001.8%Income Before Tax$1,037,4005.7%$6,049,40040.6%Income Tax Expense$327,6001.8%$1,832,70012.3%Net Income $709,8003.9%$4,216,70028.3%

Business

Accounting

Exercise 12-2 (Algo) Prepare vertical analysis (LO12-1) The income statements for Federer Sports Apparel for 2025 and 2024 are presented below. Required: Prepare a vertical analysis of the data for 2025 and 2024. (Round your percentage answers to 1 decimal place.) Net sales Cost of goods sold Gross profit Operating expenses Depreciation expense Inventory write-down Loss (litigation) Income before tax Income tax expense Net income FEDERER SPORTS APPAREL Income Statement For the Years Ended December 31 2025 $ $ Amount 18,200,000 13,431,600 4,768,400 1,437,800 855,400 91,000 1,346,800 1,037,400 327,600 709,800 % $ $ Amount 2024 14,900,000 6,645,400 8,254,600 1,057,900 879,100 0 268,200 6,049,400 1,832,700 4,216,700 %

Exercise 12-2 (Algo) Prepare vertical analysis (LO12-1) The income statements for Federer Sports Apparel for 2025 and 2024 are presented below. Required: Prepare a vertical analysis of the data for 2025 and 2024. (Round your percentage answers to 1 decimal place.) Net sales Cost of goods sold Gross profit Operating expenses Depreciation expense Inventory write-down Loss (litigation) Income before tax Income tax expense Net income FEDERER SPORTS APPAREL Income Statement For the Years Ended December 31 2025 $ $ Amount 18,200,000 13,431,600 4,768,400 1,437,800 855,400 91,000 1,346,800 1,037,400 327,600 709,800 % $ $ Amount 2024 14,900,000 6,645,400 8,254,600 1,057,900 879,100 0 268,200 6,049,400 1,832,700 4,216,700 %

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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