Preparing Income Statements by Using Net Sales as the Base: Vertical AnalysisScherer Company provided the following income statements for its first 3 years of operation:Scherer CompanyIncome StatementsYears of Operation Year 1Year 2Year 3Net sales$1,000,000$1,100,000$1,300,000Less: Cost of goods sold(300,000)(315,000)(369,000)Gross margin$700,000$785,000$931,000Less: Operating expenses(431,000)(488,000)(600,500)Income taxes(111,000)(123,000)(135,800)Net income$158,000$174,000$194,700Required:Prepare common-size income statements by using net sales as the base. (Note: Enter all amounts as positive numbers, except for a net loss. Enter net loss as a negative number, if applicable. Round answers to the nearest whole percentage. Percentages may not calculate down.)Scherer CompanyCommon-Size Income StatementsYears of Operation Year 1Year 1Year 2Year 2Year 3Year 3 DollarsPercentageDollarsPercentageDollarsPercentageNet sales$1,000,000fill in the blank 1%1,100,000fill in the blank 2%$1,300,000fill in the blank 3%Less: Cost of goods sold(300,000)fill in the blank 4(315,000)fill in the blank 5(369,000)fill in the blank 6Gross margin$700,000fill in the blank 7$785,000fill in the blank 8$931,000fill in the blank 9Less: Operating expenses(431,000)fill in the blank 10(488,000)fill in the blank 11(600,500)fill in the blank 12Income taxes(111,000)fill in the blank 13(123,000)fill in the blank 14(135,800)fill in the blank 15Net income$158,000fill in the blank 16%$174,000fill in the blank 17%$194,700fill in the blank 18%

We are required in this question to prepare common size income statement. This type of statement…

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Preparing Income Statements by Using Net Sales as the Base: Vertical Analysis

Scherer Company provided the following income statements for its first 3 years of operation:

Scherer Company Income Statements Years of Operation
	Year 1	Year 2	Year 3
Net sales	$1,000,000	$1,100,000	$1,300,000
Less: Cost of goods sold	(300,000)	(315,000)	(369,000)
Gross margin	$700,000	$785,000	$931,000
Less:
Operating expenses	(431,000)	(488,000)	(600,500)
Income taxes	(111,000)	(123,000)	(135,800)
Net income	$158,000	$174,000	$194,700

Required:

Prepare common-size income statements by using net sales as the base. (Note: Enter all amounts as positive numbers, except for a net loss. Enter net loss as a negative number, if applicable. Round answers to the nearest whole percentage. Percentages may not calculate down.)

Scherer Company
Common-Size Income Statements
Years of Operation
	Year 1	Year 1	Year 2	Year 2	Year 3	Year 3
	Dollars	Percentage	Dollars	Percentage	Dollars	Percentage
Net sales	$1,000,000	fill in the blank 1%	1,100,000	fill in the blank 2%	$1,300,000	fill in the blank 3%
Less: Cost of goods sold	(300,000)	fill in the blank 4	(315,000)	fill in the blank 5	(369,000)	fill in the blank 6
Gross margin	$700,000	fill in the blank 7	$785,000	fill in the blank 8	$931,000	fill in the blank 9
Less:
Operating expenses	(431,000)	fill in the blank 10	(488,000)	fill in the blank 11	(600,500)	fill in the blank 12
Income taxes	(111,000)	fill in the blank 13	(123,000)	fill in the blank 14	(135,800)	fill in the blank 15
Net income	$158,000	fill in the blank 16%	$174,000	fill in the blank 17%	$194,700	fill in the blank 18%

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