Preparing Common-Size Income Statements by Using Base Period Horizontal Analysis

Allyson Company provided the following income statements for its first three years of operation:

	Year 1		Year 2		Year 3
Net sales	$1,000,000		$1,100,000		$1,250,000
Less: Cost of goods sold	(700,000)		(750,000)		(810,000)
Gross margin	$ 300,000		$ 350,000		$ 440,000
Less:
Operating expenses	(200,000)		(251,000)		(310,000)
Income taxes	(40,000)		(33,000)		(52,000)
Net income	$ 60,000		$ 66,000		$ 78,000

Prepare common-size income statements by using year 1 as the base period. (Note: Round answers to the nearest whole percentage.)

Allyson Company

Income Statements

Years of Operation

Year 1 Dollars

Year 1 Percent

Year 2 Dollars

Year 2 Percent

Year 3 Dollars

Year 3 Percent

Net sales

$1,000,000

% Correct 12

$1,100,000

% Correct 14

$1,250,000

% Correct 16

Less: Cost of goods sold

(700,000)

Correct 19

(750,000)

Correct 21

(810,000)

Correct 23

Gross margin

$ 300,000

% Correct 26

$ 350,000

% Correct 28

$ 440,000

% Correct 30

Less:

Operating expenses

(200,000)

Correct 34

(251,000)

Correct 36

(310,000)

Correct 38

Income taxes

(40,000)

Correct 41

(33,000)

Correct 43

(52,000)

Correct 45

Net income

$ 60,000

% Correct 48

$ 66,000

% Correct 50

$ 78,000

%