A comparative income statement is given below for McKenzie Sales, Ltd., of Toronto: McKenzie Sales, Ltd. Comparative Income Statement This Year Last Year Sales $ 7,340,000 $ 5,578,400 Cost of goods sold 4,730,000 3,511,500 Gross margin 2,610,000 2,066,900 Selling and administrative expenses: Selling expenses 1,375,000 1,079,500 Administrative expenses 711,500 615,000 Total expenses 2,086,500 1,694,500 Net operating income 523,500 372,400 Interest expense 101,000 91,000 Net income before taxes $ 422,500 $ 281,400 Members of the company’s board of directors are surprised to see that net income increased by only $141,100 when sales increased by $1,761,600. Required: 1. Express each year's income statement in common-size percentages. (Round your percentage answers to 1 decimal place (i.e., 0.1234 should be entered as 12.3).) McKenzie Sales, Ltd. Comparative Income Statement This Year % Last Year % Sales 7,340,000 100.0% 5,578,400 100.0% Cost of goods sold 4,730,000 64.4% 3,511,500 62.9% Gross margin 2,610,000 35.6% 2,066,900 37.1% Selling and administrative expenses: Selling expenses 1,375,000 18.7% 1,079,500 19.4% Administrative expenses 711,500 9.7% 615,000 11.0% Total expenses 2,086,500 28.4% 1,694,500 30.4% Net operating income 523,500 7.1% 372,400 6.7% Interest expense 101,000 1.4% 91,000 1.6% Net income before taxes 422,500 5.8% 281,400 5.0% THIS ANSWER WAS SHOWN TO BE INCORECT

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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A comparative income statement is given below for McKenzie Sales, Ltd., of Toronto:

McKenzie Sales, Ltd. Comparative Income Statement
	This Year	Last Year
Sales	$	7,340,000	$	5,578,400
Cost of goods sold		4,730,000		3,511,500
Gross margin		2,610,000		2,066,900
Selling and administrative expenses:
Selling expenses		1,375,000		1,079,500
Administrative expenses		711,500		615,000
Total expenses		2,086,500		1,694,500
Net operating income		523,500		372,400
Interest expense		101,000		91,000
Net income before taxes	$	422,500	$	281,400

Members of the company’s board of directors are surprised to see that net income increased by only $141,100 when sales increased by $1,761,600.

Required:

1. Express each year's income statement in common-size percentages. (Round your percentage answers to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)

McKenzie Sales, Ltd. Comparative Income Statement
	This Year	%	Last Year	%
Sales	7,340,000	100.0%	5,578,400	100.0%
Cost of goods sold	4,730,000	64.4%	3,511,500	62.9%
Gross margin	2,610,000	35.6%	2,066,900	37.1%
Selling and administrative expenses:
Selling expenses	1,375,000	18.7%	1,079,500	19.4%
Administrative expenses	711,500	9.7%	615,000	11.0%
Total expenses	2,086,500	28.4%	1,694,500	30.4%
Net operating income	523,500	7.1%	372,400	6.7%
Interest expense	101,000	1.4%	91,000	1.6%
Net income before taxes	422,500	5.8%	281,400	5.0%

THIS ANSWER WAS SHOWN TO BE INCORECT

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