Vertical Analysis

Sundahl Companys income statements for the past 2 years are as follows:

Sundahl Company Income Statements For the Years 1 and 2
	Year 1	Year 2
Sales	$2,000,000.00	$1,800,000.00
Less: Cost of goods sold	(1,400,000.00)	(1,200,000.00)
Gross margin	$600,000.00	$600,000.00
Less operating expenses:
Selling expenses	$(300,000.00)	$(300,000.00)
Administrative expenses	(100,000.00)	(110,000.00)
Operating income	$200,000.00	$190,000.00
Less:
Interest expense	(50,000.00)	(40,000.00)
Income before taxes	$150,000.00	$150,000.00

Required:

1. Prepare a common-size income statement for Year 1 by expressing each line item as a percentage of sales revenue. (Note: Enter all amounts as positive numbers. Round answers to the nearest tenth of a percent.)

Prepare a common-size income statement for Year 2 by expressing each line item as a percentage of sales revenue. (Note: Enter all amounts as positive numbers. Round answers to the nearest tenth of a percent.) Due to rounding, percentages may not total 100%.

Sundahl Company
Income Statement
For Year 2
	Year 2	Percent of Year 2 Sales
Sales
Less: Cost of goods sold
Gross margin
Less operating expenses:
Selling expenses
Administrative expenses
Operating income
Less:
Interest expense
Income before taxes