Question

The following income statements were drawn from the annual reports of Toner Sales Company:

	Year 2*				Year 3*
Net sales	$	426,500			$	520,600
Cost of goods sold		(312,000	)			(369,600	)
Gross margin		114,500				151,000
Less: Operating expense
Selling and administrative expenses		(50,200	)			(64,800	)
Net income	$	64,300			$	86,200

*All dollar amounts are reported in thousands.

The president’s message in the company’s annual report stated that the company had implemented a strategy to increase market share by spending more on advertising. The president indicated that prices held steady and sales grew as expected. Prepare common size income statements and make appropriate references to the differences between Year 2 and Year 3. (Round your final answers for percentage values to 1 decimal place. Enter dollar amounts in thousands, not in whole dollars.)

Answer 1