Preparing Income St ase: Vertical Analysis Scherer Company provided the following income statements for its first 3 years of operation: Scherer Company Income Statements Years of Operation Year 1 Year 2 Year 3 Net sales $1,000,000.00 $1,100,000.00 $1,300,000.00 Less: Cost of goods sold Gross margin $700,000.00 (300,000.00) (310,000.00) (364,000.00) $936,000.00 $790,000.00 Less: Operating expenses (421,000.00) (484,000.00) (591,000.00) Income taxes (111,600.00) (122,400.00) (137,800.00) Net income $167,400.00 $183,600.00 $207,200.00 Required: Prepare common-size income statements by using net sales as the base. (Note: Enter all amounts as positive numbers, except for a net loss. Enter net loss as a negative number, if applicable. Round answers to the nearest whole percentage. Percentages may not calculate down.) Scherer Company Common-Size Income Statements Years of Operation Year 1 Dollars Year 1 Year 2 Year 2 Year 3 Percentage Dollars Percentage Dollars Year 3 Percentage Net sales $1,000,000 100 % 1,100,000 100 % $1,300,000 100 % Less: Cost of goods sold (300,000) 30 (310,000) 27.01 x (364,000) 28 Gross margin $700,000 70 $790,000 71.82 x $936,000 72 Less: Operating expenses (421,000) 40.19 X Income taxes (111,600) 11.16 (484,000) (122,400) 44 11.13 X (591,000) (137,800) 45.5 X 10.60 x Net income $167,400 16.74 X % $183,600 16.69 X% $207,200 15.90 X %