A comparative income statement is given below for Rainbow Company Rainbow Company Comparative Income Statement For the Years Ended June 30, 2019, and 2018 2019 2018 Sales 5,000,000.00 P 4,000,000.00 Less: Cost of Goods Sold 3,160,000.00 2,400,000.00 Gross Margin P 1,840,000.00 P 1,600,000.00 Selling Expenses 900,000.00 700,000.00 Administrative Expenses 680,000.00 584,000.00 Total Expenses 1,580,000.00 1,284,000.00 Net Operating Income 260,000.00 P 316,000.00 Interest Expense 70,000.00 40,000.00 Net Income Before Taxes 190,000.00 276,000.00 The president is concerned that net income is down in 2019 even though sales have increased during the year. The president is also concerned that administrative expenses have increased, since the company made a concerted effort during 2019 to pare "fat" out of the organization. Required: 1. Express each year's income statement in common-size percentages. Carry computations to one decimal place. 2. Comment briefly on the changes between the two years.
A comparative income statement is given below for Rainbow Company Rainbow Company Comparative Income Statement For the Years Ended June 30, 2019, and 2018 2019 2018 Sales 5,000,000.00 P 4,000,000.00 Less: Cost of Goods Sold 3,160,000.00 2,400,000.00 Gross Margin P 1,840,000.00 P 1,600,000.00 Selling Expenses 900,000.00 700,000.00 Administrative Expenses 680,000.00 584,000.00 Total Expenses 1,580,000.00 1,284,000.00 Net Operating Income 260,000.00 P 316,000.00 Interest Expense 70,000.00 40,000.00 Net Income Before Taxes 190,000.00 276,000.00 The president is concerned that net income is down in 2019 even though sales have increased during the year. The president is also concerned that administrative expenses have increased, since the company made a concerted effort during 2019 to pare "fat" out of the organization. Required: 1. Express each year's income statement in common-size percentages. Carry computations to one decimal place. 2. Comment briefly on the changes between the two years.
Chapter10: Financial Statements And Reports
Section: Chapter Questions
Problem 3.3C
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Problem 2 (Common-Size Income Statement)
A comparative income statement is given below for Rainbow Company
Rainbow Company
Comparative Income Statement
For the Years Ended June 30, 2019, and 2018
2019
2018
Sales
5,000,000.00
4,000,000.00
Less: Cost of Goods Sold
3,160,000.00
2,400,000.00
Gross Margin
1,840,000.00
P
1,600,000.00
Selling Expenses
900,000.00
700,000.00
Administrative Expenses
680,000.00
584,000.00
Total Expenses
1,580,000.00
1,284,000.00
Net Operating Income
260,000.00
P
316,000.00
Interest Expense
70,000.00
40,000.00
Net Income Before Taxes
P
190,000.00
P
276,000.00
The president is concerned that net income is down in 2019 even though sales have increased
during the year. The president is also concerned that administrative expenses have increased,
since the company made a concerted effort during 2019 to pare "fat" out of the organization.
Required:
1. Express each year's income statement in common-size percentages. Carry
computations to one decimal place.
2. Comment briefly on the changes between the two years.
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