Question

Che 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? Income Statement Reason for Decline in Net Income Express the following comparative income statements in common-size percents. (Round your percentage answers to 1 decimal place.) the GOMEZ CORPORATION Comparative Income Statements For Years Ended December 31 Current Year Prior Year $ % $ Sales $ 795,000 $ 690,000 Cost of goods sold 568,100 286,600 Gross profit 226,900 403,400 Operating expenses 130,400 266,000 Net income $ 96,500 $ 137,400 < Income Statement Reason for Decline in Net Income >

Answer 1

Solution

Question1

GOMEZ CORPORATION
Comparative income statement
For the year ended December 31, 2017 and 2016
	2017		2016
	$	%	$	%
Sales	$ 795,000	100.0%	$ 690,000	100.0%
Cost of goods sold	$ 568,100	71.5%	$ 286,600	41.5%
Gross profit	$ 226,900	28.5%	$ 403,400	58.5%
Operating expense	$ 130,400	16.4%	$ 266,000	38.6%
Net income	$ 96,500	12.1%	$ 137,400	19.9%

Net income decrease due to increase in cost of goods sold.

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Question 2

Simon Company
Common Size Comparative balance Sheet
December 31st
	Current year	1 Year ago	2 Years ago
Assets
Cash	6.0%	8.2%	9.8%
Accounts Receivables , net	16.8%	14.0%	13.6%
Merchandise Inventory	21.9%	18.1%	14.5%
Prepaid Expenses	1.9%	2.1%	1.1%
Plant Assets ,Net	53.4%	57.5%	61.0%
Total Assets	100.0%	100.0%	100.0%
Liabilities and Equity
Accounts Payable	25.4%	16.4%	12.9%
Long Term Notes Payable Secured by mortgage on palnt assets	19.0%	22.5%	22.1%
Common Stock $10 Par	27.7%	32.1%	39.4%
Retained Earnings	27.9%	28.9%	25.6%
Total Liabilities and Equity	100.0%	100.0%	100.0%

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Change in accounts receivable	Favorable
Change in merchandise inventory	Favorable