Question

Sundahl Company Income Statements For the Years 1 and 2 1 Year 1 Year 2 2 Sales $2,004,000.00 $1,802,000.00 3 Less: Cost of goods sold (1,402,000.00) (1,200,000.00) 4 Gross margin $602,000.00 $602,000.00 5 Less operating expenses: 6 Selling expenses $(292,000.00) $(292,000.00) 7 Administrative expenses (110,800.00) (119,700.00) 8 Operating income $199,200.00 $190,300.00 9 Less: 10 Interest expense (49,200.00) (40,300.00) 11 Net income before taxes $150,000.00 $150,000.00 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. 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.)

Answer 1

Answer-

SUNDAHL COMPANY
VERTICAL ANALYSIS OF INCOME STATEMENTS
FOR THE YEAR ENDED DECEMBER 31
YEARS	Year 1	%	Year 2	%
	$		$
Sales	2004000	100.0	1802000	100.0
Less-Cost of goods sold	1402000	70.0	1200000	66.6
Gross profit	602000	30.0	602000	33.4
Less-Operating expenses
Selling expenses	292000	14.6	292000	16.2
Administrative expenses	110800	5.5	119700	6.6
Operating income	199200	9.9	190300	10.6
Less- Interest expense	49200	2.5	40300	2.2
Net income before taxes	150000	7.5	150000	8.3