The income statements for Finac Company for the two years are as follows: Year 2 Year 1 Sales $487,000 $402,000 Cost of goods sold 330,000 268,000 Gross profit $157,000 $134,000 Operating expenses 130,000 116,000 Net income $ 27,000 $ 18,000 a. Prepare common size income statements 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. b. Interpret the common size income statements. In particular, state and explain whether the changes from year 1 to year 2 are favorable or unfavorable.

The income statements for Finac Company for the two years are as follows: Year 2 Year 1 Sales $487,000 $402,000 Cost of goods sold 330,000 268,000 Gross profit $157,000 $134,000 Operating expenses 130,000 116,000 Net income $ 27,000 $ 18,000 a. Prepare common size income statements 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. b. Interpret the common size income statements. In particular, state and explain whether the changes from year 1 to year 2 are favorable or unfavorable.

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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