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Managerial Accounting: The Corners...

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

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
Publisher: Cengage Learning
ISBN: 9781337115773
Chapter 15, Problem 24BEB
Textbook Problem
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Jasmine Company provided the following income statements for its first 3 years of operation:

Chapter 15, Problem 24BEB, Jasmine Company provided the following income statements for its first 3 years of operation: Refer

Refer to the information for Jasmine Company above.

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 JA:

 Year 1Year 2Year 3
Particulars($)(%)($)(%)($)(%)
Net Sales5,000,00010014,500,0009024,000,000803
Less: Cost of goods sold3,000,0001003,250,000108364,000120
Gross margin2,000,0001001,250,00063936,00020
Less: Operating expenses1,420,000100800,00056591,00012
   Income taxes232,000100180,00078137,80058
Net income348,000100270,00078207,20029

Table (1)

Working Note:

1...

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Chapter 15 Solutions

Managerial Accounting: The Cornerstone of Business Decision-Making
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