Question

	2019		2018		2017		2016		2015
Sales	$	556,950	$	368,841	$	290,426	$	200,294	$	146,200
Cost of goods sold		286,545		189,809		151,417		104,100		74,562
Accounts receivable		27,012		21,503		19,836		11,737		10,029

Compute trend percents for the above accounts, using 2015 as the base year.

Trend Percent for Net Sales: Choose Numerator: / Choose Denominator: / = Trend percent 2019: / = % 2018: / = % 2017: / = % 2016: / = % Trend Percent for Cost of Goods Sold: Choose Numerator: / Choose Denominator: / = Trend percent 2019: / = % 2018: / = % 2017: / = % 2016: / = % Trend Percent for Accounts Receivables: Choose Numerator: / Choose Denominator: / = Trend percent 2019: / = % 2018: / = % 2017: / = % 2016: / = %

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Express the following comparative income statements in common-size percents.
Using the common-size percentages, which item is most responsible for the decline in net income?

Express the following comparative income statements in common-size percents. (Round your percentage answers to 1 decimal place.)

	GOMEZ CORPORATION Comparative Income Statements For Years Ended December 31 Current Year Prior Year $ % $ % Sales $760,000 $695,000 Cost of goods sold 570,800 293,200 Gross profit 189,200 401,800 Operating expenses 130,400 250,400 Net income $58,800 $151,400

Using the common-size percentages, which item is most responsible for the decline in net income?

Answer 1

Question 1

Solution

Trend Percent for Net Sales:
	Analysis period Net Sales	/	Base year net sales	=	Trend Percent
2019	$   556,950.00		$     146,200.00		381%
2018	$   368,841.00		$     146,200.00		252%
2017	$   290,426.00		$     146,200.00		199%
2016	$   200,294.00		$     146,200.00		137%
Trend Percent for Cost of goods sold
	Analysis period Net Sales	/	Base year net sales	=	Trend Percent
2019	$   286,545.00		$       74,562.00		384%
2018	$   189,809.00		$       74,562.00		255%
2017	$   151,417.00		$       74,562.00		203%
2016	$   104,100.00		$       74,562.00		140%
Trend Percent for Accounts receivable
	Analysis period Net Sales	/	Base year net sales	=	Trend Percent
2019	$      27,012.00		$       10,029.00		269%
2018	$      21,503.00		$       10,029.00		214%
2017	$      19,836.00		$       10,029.00		198%
2016	$      11,737.00		$       10,029.00		117%

.

Question 2

Solution

GOMEZ CORPORATION
Comparative income statement
For the year ended December 31, 2017 and 2016
	Current year		Previous year
	$	%	$	%
Sales	$ 760,000	100.0%	$ 695,000	100.0%
Cost of goods sold	$ 570,800	75.1%	$ 293,200	42.2%
Gross profit	$ 189,200	24.9%	$ 401,800	57.8%
Operating expense	$ 130,400	17.2%	$ 250,400	36.0%
Net income	$ 58,800	7.7%	$ 151,400	21.8%

Cost of goods sold is most responsible for decrease in net income.