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

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

Line Item Description Year $1$ Year $2$ Year $3$

Net sales $$10,000,000$ $$8,000,000$ $$6,500,000$

Less: Cost of goods sold $6,000,0005,500,0005,000,000$

Gross margin $$4,000,000$ $$2,500,000$ $$1,500,000$

Less: Operating expenses $2,200,0001,300,000450,000$

Income taxes $720,000480,000420,000$

Net income $$1,080,000$ $$720,000$ $$630,000$

Required:

Prepare common$-$size income statements by using net sales as the base. Round answers to the nearest whole percentage.

Azita Company

Income Statement

Line Item Description Year $1$ dollars Year $1$ percent Year $2$ dollars Year $2$ percent Year $3$ dollars Year $3$ percent

$$-$ Select $--$ Select $-\%$ $$-$ Select $--$ Select $-\%$ $$-$ Select $--$ Select $-\%$

$-$ Select $--$ Select $--$ Select $--$ Select $--$ Select $--$ Select $-$

$$-$ Select $--$ Select $-$ $$-$ Select $--$ Select $-$ $$-$ Select $--$ Select $-$

$-$ Select $--$ Select $--$ Select $--$ Select $--$ Select $--$ Select $-$

$-$ Select $--$ Select $-$