Question
Preparing Income Statements by Using Net Sales as the Base: Vertical Analysis Scherer Company provided the following income statements for its first 3 years of
Preparing Income Statements by Using Net Sales as the Base: 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 | $950,000 | $1,045,000 | $1,235,000 |
Less: Cost of goods sold | (292,000) | (316,000) | (365,000) |
Gross margin | $658,000 | $729,000 | $870,000 |
Less: | |||
Operating expenses | (414,000) | (485,000) | (582,500) |
Income taxes | (108,600) | (124,200) | (138,600) |
Net income | $135,400 | $119,800 | $148,900 |
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.)
Year 1 | Year 1 | Year 2 | Year 2 | Year 3 | Year 3 | |
Dollars | Percentage | Dollars | Percentage | Dollars | Percentage | |
Net sales | $950,000 | fill in the blank 1% | 1,045,000 | fill in the blank 2% | $1,235,000 | fill in the blank 3% |
Less: Cost of goods sold | (292,000) | fill in the blank 4 | (316,000) | fill in the blank 5 | (365,000) | fill in the blank 6 |
Gross margin | $658,000 | fill in the blank 7 | $729,000 | fill in the blank 8 | $870,000 | fill in the blank 9 |
Less: | ||||||
Operating expenses | (414,000) | fill in the blank 10 | (485,000) | fill in the blank 11 | (582,500) | fill in the blank 12 |
Income taxes | (108,600) | fill in the blank 13 | (124,200) | fill in the blank 14 | (138,600) | fill in the blank 15 |
Net income | $135,400 | fill in the blank 16% | $119,800 | fill in the blank 17% | $148,900 | fill in the blank 18% |
Feedback Area
Feedback
Set up all three years side by side in income statement form. Each line amount is a percentage of the same year's net sales.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started