Rex Company has the following income statements for the years 2000 and 1999.

\begin{tabular}{|c|c|c|}

\hline & $12 / 31 / 2000$ & 12/31/1999 \\

\hline Sales revenue. & $\$ 480,000$ & $\$ 400,000$ \\

\hline Cost of goods sold. & 380,000 & 270,000 \\

\hline Gross margin . . . . . . . & $\$ 100,000$ & $\$ 130,000$ \\

\hline Selling expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . & 40,000 & 42,000 \\

\hline General \& administrative expenses. . & 50,000 & 48,000 \\

\hline Income before income taxes. . . . . . . . . . & $\$ 10,000$ & $\overline{\$ 40,000}$ \\

\hline Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . & 3,000 & 12,000 \\

\hline Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . & $\$ 7,000$ & $\$ 28,000$ \\

\hline

\end{tabular}

1. Prepare common-size income statements for Rex Company.

2. Interpretive Question: Explain why net income decreased in the year 2000