Cuneo Company
Income Statements
For the Years 1, 2 and 3
		Year 1		Year 2		Year 3
Sales		$ 1,000,000		$ 1,200,000		$ 1,700,000
less: Cost of Goods Sold		(700,000)		(700,000)		(1,000,000)
Gross margin		$ 300,000		$ 500,000		$ 700,000
Less operating expenses:
Selling expenses		(150,000)		(220,000)		(250,000)
Administrative expenses		(50,000)		(60,000)		(120,000)
Operating income		$ 100,000		$ 220,000		$ 330,000
Less: Interest expense		(25,000)		(25,000)		(25,000)
Income before taxes		$ 75,000		$ 195,000		$ 305,000	Horizontal Analysis Refer to the information for Cuneo Company above. Required: Question 1. Prepare a common-size income statement for Year 2 by expressing each line item for Year 2 as a percentage of that same line item from Year 1. (Note: Round percentages to the nearest tenth of a percent.) Question 2. Prepare a common-size income statement for Year 3 by expressing each line item for Year 3 as a percentage of that same line item from Year 1. (Note: Round percentages to the nearest tenth of a percent.