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Sundahl Company’s income statements for the past 2 years are as follows: Refer to the information for Sundahl Company above. Required: 1. Prepare a common-size income statement for Year 1 by expressing each line item as a percentage of sales revenue. ( Note: Round percentages to the nearest tenth of a percent.) 2. Prepare a common-size income statement for Year 2 by expressing each line item as a percentage of sales revenue. ( Note: Round percentages to the nearest tenth of a percent.)

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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
BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
Publisher: Cengage Learning
ISBN: 9781337115773
Chapter 15, Problem 38E
Textbook Problem
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Sundahl Company’s income statements for the past 2 years are as follows:

Chapter 15, Problem 38E, Sundahl Companys income statements for the past 2 years are as follows: Refer to the information for

Refer to the information for Sundahl Company above.

Required:

  1. 1. Prepare a common-size income statement for Year 1 by expressing each line item as a percentage of sales revenue. (Note: Round percentages to the nearest tenth of a percent.)
  2. 2. Prepare a common-size income statement for Year 2 by expressing each line item as a percentage of sales revenue. (Note: Round percentages to the nearest tenth of a percent.)

1.

To determine

Construct the common-size income statement with the help of 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 SU:

Particulars

Year1

($)

Year 1

(%)

Net Sales2,000,000100.01
Less: Cost of goods sold1,400,00070.0
Gross margin600,00030.0
Less: Selling expenses300,00015.0
   Administrative expenses100,0005...

2.

To determine

Construct the common-size income statement with the help of year 2 as the base period.

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Managerial Accounting: The Cornerstone of Business Decision-Making
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