Question

Scherer Company

Income Statements

Years of Operation

1		Year 1	Year 2	Year 3
2	Net sales	$1,090,000.00	$1,155,400.00	$1,406,100.00
3	Less: Cost of goods sold	(299,000.00)	(308,000.00)	(369,000.00)
4	Gross margin	$791,000.00	$847,400.00	$1,037,100.00
5	Less:
6	Operating expenses	(431,000.00)	(488,000.00)	(589,500.00)
7	Income taxes	(108,800.00)	(124,600.00)	(135,400.00)
8	Net income	$251,200.00	$234,800.00	$312,200.00

	Required:
	Prepare common-size income statements by using Year 1 as the base period.

Refer to the list below for the exact wording of an account title within your income statement.

Labels
Add
Less
Amount Descriptions
Add contribution margin
Cost of goods sold
Gross margin
Income taxes
Less contribution margin
Net income
Net loss
Net sales
Operating Expenses	Prepare common-size income statements by using Year 1 as the base period. (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. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries.) Score: 0/164 Scherer Company Common-Size Income Statements Years of Operation 1 Year 1 Year 1 Year 2 Year 2 Year 3 Year 3 2 Dollars Percentage Dollars Percentage Dollars Percentage 3 4 5 6 7 8 9

Answer 1

Common Size income Statement
			Year 1	%	Year2	%	YEar3	%
Net Sales			1090000	100.00%	1155400	100.00%	1406100	100.00%
Cost of goods sold			299000	27.43%	308000	26.66%	369000	26.24%
Gross Margin			791000	72.57%	847400	73.34%	1037100	73.76%
Less: Operating exppenses			431000	39.54%	488000	42.24%	589500	41.92%
Before tax income			360000	33.03%	359400	31.11%	447600	31.83%
Income taxes			108800	9.98%	124600	10.78%	135400	9.63%
Net Income			251200	23.05%	234800	20.32%	312200	22.20%