Preparing Common Size Income Statements Using Base Period Horizontal Analysis Hernandez In Q17795280

Preparing Common-Size Income Statements by Using Base PeriodHorizontal Analysis
Hernandez, Inc. provided the following income statements for itsfirst 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)

(235,000)

(310,000)

Income taxes
(40,000)

(49,000)

(52,000)

Net income
$ 60,000

$ 66,000

$ 78,000

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

Hernandez, Inc.

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

  %

$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)

  

(235,000)

  

(310,000)

  

Income taxes

(40,000)

  

(49,000)

  

(52,000)

  

Net income

$ 60,000

  %

$ 66,000

  %

$ 78,000

  %

 
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