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AccountingManagerial Accounting: The Cornerstone of Business Decision-Making7th Edition
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Scherer Company provided the following income statements for its first 3 years of operation: Refer to the information for Scherer Company on the previous page. Required: Prepare common-size income statements by using Year 1 as the base period. ( Note: Round answers to the nearest whole percentage.)

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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
Publisher: Cengage Learning
ISBN: 9781337115773

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Chapter
Section
Problem 1DQ
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Problem 3DQ
Problem 4DQ
Problem 5DQ
Problem 6DQ
Problem 7DQ
Problem 8DQ
Problem 9DQ
Problem 10DQ
Problem 11DQ
Problem 12DQ
Problem 13DQ
Problem 14DQ
Problem 15DQ
Problem 16DQ
Problem 1MCQ
Problem 2MCQ
Problem 3MCQ
Problem 4MCQ
Problem 5MCQ
Problem 6MCQ
Problem 7MCQ
Problem 8MCQ
Problem 9MCQ
Problem 10MCQ
Problem 11BEA
Problem 12BEA
Problem 13BEA
Problem 14BEA
Problem 15BEA
Problem 16BEA
Problem 17BEA
Problem 18BEA
Problem 19BEA
Problem 20BEA
Problem 21BEA
Problem 22BEA
Problem 23BEA
Problem 24BEB
Problem 25BEB
Problem 26BEB
Problem 27BEB
Problem 28BEB
Problem 29BEB
Problem 30BEB
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Problem 32BEB
Problem 33BEB
Problem 34BEB
Problem 35BEB
Problem 36BEB
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Problem 55E
Problem 56P
Problem 57P
Problem 58P
Problem 59P
Problem 60P
Problem 61P
Problem 62P
Problem 63P
Problem 64P
Problem 65P
Problem 66P
Problem 67C
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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
Publisher: Cengage Learning
ISBN: 9781337115773
Chapter 15, Problem 11BEA
Textbook Problem
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Scherer Company provided the following income statements for its first 3 years of operation:

Chapter 15, Problem 11BEA, Scherer Company provided the following income statements for its first 3 years of operation: Refer

Refer to the information for Scherer Company on the previous page.

Required:

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

To determine

Construct the common-size income statement with year1 as the base period.

Explanation of Solution

Income Statement:

The statement that shows revenue and expenses incurred over a period of time (usually one year) is called income statement. It is used for external financial reporting as it helps the outsiders and investors in evaluating the firm’s financial health.

Common-size analysis

One of the techniques of financial statement analysis is common-size analysis where each item in the financial statement is expressed in terms of percentage to compare present statement with the statement of the previous year. Horizontal and vertical analyses are two forms of analysis under common-size analysis.

Income statement of the Company SC:

 Year 1Year 2Year 3
Particulars($)(%)($)(%)($)(%)
Net Sales1,000,00010011,100,00011021,300,0001303
Less: Cost of goods sold300,000100310,000103364,000121
Gross margin700,000100790,000113936,000134
Less: Operating expenses421,000100484,000115591,000140
   Income taxes111,600100122,400110137,800123
Net income167,400100183,600110207,200124

Table (1)

Working Note:

1...

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