P18-2A CJ Home Appliance Center has asked your help in comparing the company's profit performance and financial position with the average for the home appliance industry. The general manager has given you the company's income statement and balance sheet and also the industry average data for home appliance companies. CJ HOME APPLIANCE CENTER Income Statement Compared with Industry Average Year Ended December 31, 20X1 CJ Industry Average Net sales $781,000 100.0% Cost of goods sold. 497,000 65.8 Gross profit...... 284,000 34.2 Operating expenses. 159,000 19.7 Operating income. 125,000 14.5 Other expenses.. 5,000 0.4 Net income............ $120,000 14.1% CJ HOME APPLIANCE CENTER Balance Sheet Compared with Industry Average December 31, 20X1 CJ Industry Average Current assets $350.000 70.9% Plant assets. net 84.000 23.6 Intangible assets, net 6,000 0.8 Other assets 20,000 4.7 Total $460,000 100.0% Current liabilities $207,000 48.1% Long-term liabilities. 72,000 16.6 Stockholders' equity. 181,000 35.3 Total. $460,000 100.0 % Required 1. Prepare a two-column common-size income statement and balance sheet for CJ. The first column of each statement should present CJ's common-size statement, and the second column should show the industry averages. 2. For the profitability analysis, compute CJ's

(a) ratio of gross profit to net sales,

(b) ratio of operating income to net sales, and

(c) ratio of net income to net sales. Compare these fig- ures with the industry averages. Is CJ's profit performance better or worse than the industry average? 3. For the analysis of financial position, compute CJ's

(a) ratio of current assets to total assets, and

(b) ratio of stockholders' equity to total assets. Compare these ratios with the industry averages. Is CJ's financial position better or worse than the industry averages?