1. Common-Size Income Statements and Horizontal Analysis
2. Income statements for Mariners Corp. for the past two years are as follows:

3. 	(amounts in thousands of dollars)
   	2017	2016
   Sales revenue	$60,000	$50,000
   Cost of goods sold	42,000	30,000
   Gross profit	$18,000	$20,000
   Selling and administrative expense	9,000	5,000
   Operating income	$9,000	$15,000
   Interest expense	2,000	2,000
   Income before tax	$7,000	$13,000
   Income tax expense	2,000	4,000
   Net income	$5,000	$9,000

4. Required:

1. 1. Using the format in Example 13-5, prepare common-size comparative income statements for the two years for Mariners Corp. Round percentages to one decimal point.

Mariners Corp.
Common-Size Comparative Income Statements
For The Years Ended December 31, 2017 And 2016 (In Thousands of Dollars)
	2017 Dollars	2017 Percent	2016 Dollars	2016 Percent
Income before tax Income tax expense Operating income Sales revenue	$	%	$	%
Cost of goods sold Income before tax Income tax expense Operating income
Gross profit	$	%	$	%
Cost of goods sold Interest payable Sales revenue Selling and administrative expense
Cost of goods sold Interest payable Operating income Sales revenue	$	%	$	%
Cost of goods sold Interest expense Interest payable Sales revenue
Cost of goods sold Income before tax Interest payable Sales revenue	$	%	$	%
Cost of goods sold Income tax expense Interest payable Sales revenue
Net income	$	%	$	%

1. Feedback

1. 2. Based on Mariner's common size statements in 2017 compared to 2016, it can be concluded that

1. all of these are true.
2. gross profit as a percentage of sales declined due to higher cost of goods sold.
3. net income decreased both in dollars and as a percentage of sales.
4. selling and administrative expenses increased both in dollars as well as percentage of sales.

3. a

• b
• c
• d

1. Feedback

1. 3. Using the format in Example 13-2, prepare comparative income statements for Mariners Corp., including columns for the dollars and for the percentage increase or decrease in each item on the statement. Round all percentages to the nearest whole percent. If an answer is zero, enter "0".

Mariners Corp.
Comparative Statements of Income
For The Years Ended December 31, 2017 And 2016
	December 31, 2017	December 31, 2016	Increase/Decrease Dollars	Increase/Decrease (Percent)
Income before tax Income tax expense Operating income Sales revenue	$	$	$	%
Cost of goods sold Income before tax Income tax expense Operating income
Gross profit	$	$	$
Cost of goods sold Interest payable Sales revenue Selling and administrative expense
Cost of goods sold Interest payable Operating income Sales revenue	$	$	$
Cost of goods sold Interest expense Interest payable Operating income
Cost of goods sold Income before tax Interest payable Sales revenue	$	$	$
Cost of goods sold Income tax expense Interest payable Sales revenue
Net income	$	$	$

1. Feedback

1. 4. Identify the two items on the income statement that experienced the largest change from one year to the next. For each of these items, where you would look to find additional information about the change.

1. selling and administration expense, and for information refer to individual expense records.
2. Income tax expense, and for information refer to income tax return and supporting records.
3. cost of goods sold, and for information refer to refer to individual expense records.
4. sales revenue, and for information refer to sales ledgers and supporting records.

3. a and b

• b and c
• c and d
• d and a

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