Question: Preparing Common-Size Income Statements by Using Base Period Horizontal Analysis Scherer Company provided the following income statements for its first 3 years of operation: Scherer

  1. Preparing Common-Size Income Statements by Using Base Period Horizontal 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 $1,000,000.00 $1,100,000.00 $1,300,000.00
    Less: Cost of goods sold (300,000.00) (310,000.00) (364,000.00)
    Gross margin $700,000.00 $790,000.00 $936,000.00
    Less:
    Operating expenses (421,000.00) (484,000.00) (591,000.00)
    Income taxes (111,600.00) (122,400.00) (137,800.00)
    Net income $167,400.00 $183,600.00 $206,200.00
    Required:

    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.)

    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 (310,000) fill in the blank 5 (364,000) fill in the blank 6
    Gross margin $700,000 fill in the blank 7 $790,000 fill in the blank 8 $936,000 fill in the blank 9
    Less:
    Operating expenses (421,000) fill in the blank 10 (484,000) fill in the blank 11 (591,000) fill in the blank 12
    Income taxes (111,600) fill in the blank 13 (122,400) fill in the blank 14 (137,800) fill in the blank 15
    Net income $167,400 fill in the blank 16 $183,600 fill in the blank 17 $206,200 fill in the blank 18

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