The two-year comparative income statements and a note disclosure for Mercury Shoes Inc. were as follows:

A fixed asset impairment of $127,500 was recognized in 2008 as the result of abandoning an order management software system. The system project was started in early 2007 and ran into significant delays and performance problems throughout 2008. It was determined that there was no incremental benefit from completing the system. Thus, the accumulated costs associated with the system were written off.
1. Divide each amount in the 2008 and 2007 income statements by total sales for the given year.
2. Interpret the performance of the company in2008.

Transcribed Image Text:

Income Statement Mercury Shoes Inc. For the Years Ended December 31, 2008 and 2007 2008 2007 S430,000 193,500 5236,500 107,500 Sales Cost of merchandise sold Gross profit Selling and administrative expenses Loss on fixed asset impairment Income from operations Income tax expense Net income 510,000 224,400 %285,600 122,400 127,500 35,700 14,280 S 21,420 $129,000 51,600 77,400