Question

Sundahl Company’s income statements for the past 2 years are as follows:

Sundahl Company

Income Statements

For the Years 1 and 2

1		Year 1	Year 2
2	Sales	$2,005,000.00	$1,809,000.00
3	Less: Cost of goods sold	(1,401,000.00)	(1,205,000.00)
4	Gross margin	$604,000.00	$604,000.00
5	Less operating expenses:
6	Selling expenses	$(298,000.00)	$(298,000.00)
7	Administrative expenses	(110,400.00)	(121,000.00)
8	Operating income	$195,600.00	$185,000.00
9	Less:
10	Interest expense	(50,600.00)	(40,000.00)
11	Net income before taxes	$145,000.00	$145,000.00

Required:

Prepare a common-size income statement for Year 2 by expressing each line item for Year 2 as a percentage of that same line item from Year 1.

Sundahl Company’s income statements for the past 2 years are as follows:

Sundahl Company

Income Statements

For the Years 1 and 2

1		Year 1	Year 2
2	Sales	$2,005,000.00	$1,809,000.00
3	Less: Cost of goods sold	(1,401,000.00)	(1,205,000.00)
4	Gross margin	$604,000.00	$604,000.00
5	Less operating expenses:
6	Selling expenses	$(298,000.00)	$(298,000.00)
7	Administrative expenses	(110,400.00)	(121,000.00)
8	Operating income	$195,600.00	$185,000.00
9	Less:
10	Interest expense	(50,600.00)	(40,000.00)
11	Net income before taxes	$145,000.00	$145,000.00

	Required:
	Prepare a common-size income statement for Year 2 by expressing each line item for Year 2 as a percentage of that same line item from Year 1.

X

Labels and Amount Descriptions

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

X

Common-Size Income Statement

Prepare a common-size income statement for Year 2 by expressing each line item for Year 2 as a percentage of that same line item from Year 1. (Note: Enter all expenses as positive numbers. Enter net loss as a negative number, if applicable. Round answers to the nearest tenth of a percent. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries.)

Sundahl Company

Income Statement

For Year 2

1		Year 2 Amount	Percent of Year 1 Amount
2
3
4
5
6
7
8
9
10
11

Answer 1

Sundahl Company
Income Statements
For the Years 1 and 2
1		Year 1	Year 2	in %
2	Sales	20,05,000.00	18,09,000.00	90%
3	Less: Cost of goods sold	-14,01,000.00	-12,05,000.00	86%
4	Gross margin	6,04,000.00	6,04,000.00	100%
5	Less operating expenses:
6	Selling expenses	-2,98,000.00	-2,98,000.00	100%
7	Administrative expenses	-1,10,400.00	-1,21,000.00	110%
8	Operating income	1,95,600.00	1,85,000.00	95%
9	Less:
10	Interest expense	-50,600.00	-40,000.00	79%
11	Net income before taxes	1,45,000.00	1,45,000.00	100%