Question

Sundahl Company’s 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: Round percentages to the nearest tenth of a percent.)
2.	Prepare a common-size income statement for Year 2 by expressing each line item as a percentage of sales revenue. (Note: Round percentages to the nearest tenth of a percent.)

Refer to the list below for the exact wording of an account title within your income statement.

Labels
Add
Add operating expenses
Less
Less operating expenses
Amount Descriptions
Administrative expenses
Contribution margin
Cost of goods sold
Gross margin
Income after taxes
Income before taxes
Interest expense
Operating income
Sales
Selling expenses
Total

Answer 1