50.1K

Verified Solution

Link Copied!

Preparing Common-Size Income Statements by Using Base Period Horizontal Analysis

Allyson Company provided the following income statements for its first three years of operation:

	Year 1		Year 2		Year 3
Net sales	$1,000,000		$1,100,000		$1,250,000
Less: Cost of goods sold	(700,000)		(750,000)		(810,000)
Gross margin	$ 300,000		$ 350,000		$ 440,000
Less:
Operating expenses	(200,000)		(251,000)		(310,000)
Income taxes	(40,000)		(33,000)		(52,000)
Net income	$ 60,000		$ 66,000		$ 78,000

Prepare common-size income statements by using year 1 as the base period. (Note: Round answers to the nearest whole percentage.) Allyson Company Income Statements Years of Operation Year 1 Dollars Year 1 Percent Year 2 Dollars Year 2 Percent Year 3 Dollars Year 3 Percent Net sales $1,000,000 % Correct 12 $1,100,000 % Correct 14 $1,250,000 % Correct 16 Less: Cost of goods sold (700,000) Correct 19 (750,000) Correct 21 (810,000) Correct 23 Gross margin $ 300,000 % Correct 26 $ 350,000 % Correct 28 $ 440,000 % Correct 30 Less: Operating expenses (200,000) Correct 34 (251,000) Correct 36 (310,000) Correct 38 Income taxes (40,000) Correct 41 (33,000) Correct 43 (52,000) Correct 45 Net income $ 60,000 % Correct 48 $ 66,000 % Correct 50 $ 78,000 %

Answer & Explanation Solved by verified expert

See Answer