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Express the following comparative income statements in common-size percents. Using the common-size percents, which item is most responsible for the decline in net income? Complete this question by entering your answers in the tabs below. Reason for Decline in Net Income Income Statement Express the following comparative income statements in common-size percents. (Round your percentage answers to 1

Express the following comparative income statements in common-size percents. Using the common-size percents, which item is most responsible for the decline in net income? Complete this question by entering your answers in the tabs below. Reason for Decline in Net Income Income Statement Express the following comparative income statements in common-size percents. (Round your percentage answers to 1

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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**Comparative Income Statements Analysis** Analyze the following income statements expressed in common-size percentages to determine which factor is most responsible for the decline in net income. **Instructions:** 1. Review the comparative income statements below. 2. Translate financial data into common-size percentages. 3. Identify the key factor causing a decline in net income. **GOMEZ CORPORATION** **Comparative Income Statements for Years Ended December 31** | Item | Current Year $ | Current Year % | Prior Year $ | Prior Year % | |--------------------------|----------------|----------------|--------------|--------------| | **Sales** | $765,000 | [Calculate] | $665,000 | [Calculate] | | **Cost of Goods Sold** | $568,100 | [Calculate] | $293,200 | [Calculate] | | **Gross Profit** | $196,900 | [Calculate] | $371,800 | [Calculate] | | **Operating Expenses** | $129,200 | [Calculate] | $225,200 | [Calculate] | | **Net Income** | $67,700 | [Calculate] | $146,600 | [Calculate] | **Guidance:** - Convert the dollar figures into percentages of sales to see each component's impact relative to total revenue. - Consider what changes in percentages indicate about cost structure and efficiency. By analyzing these figures, you can discern operational efficiencies and areas needing improvement to understand the financial health of Gomez Corporation.
Transcribed Image Text:**Comparative Income Statements Analysis** Analyze the following income statements expressed in common-size percentages to determine which factor is most responsible for the decline in net income. **Instructions:** 1. Review the comparative income statements below. 2. Translate financial data into common-size percentages. 3. Identify the key factor causing a decline in net income. **GOMEZ CORPORATION** **Comparative Income Statements for Years Ended December 31** | Item | Current Year $ | Current Year % | Prior Year $ | Prior Year % | |--------------------------|----------------|----------------|--------------|--------------| | **Sales** | $765,000 | [Calculate] | $665,000 | [Calculate] | | **Cost of Goods Sold** | $568,100 | [Calculate] | $293,200 | [Calculate] | | **Gross Profit** | $196,900 | [Calculate] | $371,800 | [Calculate] | | **Operating Expenses** | $129,200 | [Calculate] | $225,200 | [Calculate] | | **Net Income** | $67,700 | [Calculate] | $146,600 | [Calculate] | **Guidance:** - Convert the dollar figures into percentages of sales to see each component's impact relative to total revenue. - Consider what changes in percentages indicate about cost structure and efficiency. By analyzing these figures, you can discern operational efficiencies and areas needing improvement to understand the financial health of Gomez Corporation.
**Understanding Decline in Net Income Using Common-Size Percents** This section includes a tool for analyzing financial statements, specifically focusing on identifying the reasons for a decline in net income using common-size percents. - **Tabs:** - **Income Statement:** View detailed financial data to evaluate overall performance. - **Reason for Decline in Net Income:** Analyze specific factors contributing to changes in net income. **Question Prompt:** - "Using the common-size percents, which item is most responsible for the decline in net income?" This question encourages analysis of financial data to pinpoint the element most impacting net income decline. - **Input Field:** Users are prompted to input their findings based on the provided financial data. **Navigation:** - Buttons to switch between sections: - **Income Statement (Active)** - **Reason for Decline in Net Income (Inactive)** This educational tool aims to enhance understanding of financial statements by examining variations over time using percentage analysis.
Transcribed Image Text:**Understanding Decline in Net Income Using Common-Size Percents** This section includes a tool for analyzing financial statements, specifically focusing on identifying the reasons for a decline in net income using common-size percents. - **Tabs:** - **Income Statement:** View detailed financial data to evaluate overall performance. - **Reason for Decline in Net Income:** Analyze specific factors contributing to changes in net income. **Question Prompt:** - "Using the common-size percents, which item is most responsible for the decline in net income?" This question encourages analysis of financial data to pinpoint the element most impacting net income decline. - **Input Field:** Users are prompted to input their findings based on the provided financial data. **Navigation:** - Buttons to switch between sections: - **Income Statement (Active)** - **Reason for Decline in Net Income (Inactive)** This educational tool aims to enhance understanding of financial statements by examining variations over time using percentage analysis.
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