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Year 2 Year 1 Sales...

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Accounting

Year 2 Year 1
Sales $ 489,000 $ 393,000
Cost of goods sold 330,000 268,000
Gross profit $ 159,000 $ 125,000
Operating expenses 130,000 116,000
Net income $ 29,000 $ 9,000

a. Prepare common size income statements for Price Company, a sole proprietorship, for the two years shown as above by converting the dollar amounts into percentages. For each year, sales will appear as 100 percent and other items will be expressed as a percentage of sales. (Income taxes are not involved as the business is not incorporated.)

b. State whether the changes from year 1 to year 2 are favorable or unfavorable.

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