The following income statements were drawn from the annual reports of Toner Sale

Question

The following income statements were drawn from the annual reports of Toner Sales Company: 2018 427,200 522,200 2019* Net sales Cost of goods sold Gross margin Less: Operating expense (307 584) 323,764) 119,616 198,436 Selling and administrative expenses Net Income -93, 984) $ 25,632 (114,884) $ 83,552 All dollar amounts are reported in thousands. The president's message in the company's annual report stated that the company had implemented a strategy to increase market share by spending more on advertising. The president indicated that prices held steady and sales grew as expected. Prepare common size income statements and make appropriate references to the differences between 2018 and 2019. (Round all intermediate calculations and final answers for percentage values to 1 decimal place. Enter answers in millions, not in dollar) TONER SALES COMPANY Income Statement For the Years Ended December 31, 2018 and 2019 2018 2019

Explanation / Answer

In a common size income statenent each item is expressed as a percentage of sales.

Even though the percentage of advertisement expenses in relation to sales remained the same over period of 2 years, due to decrease in the cost of goods sold by 10%, net income increased by 10%

Particulars 2018 2019 Amount % Amount % Sales     427,200.00 100%     522,200.00 100% (-)Cost of goods sold     307,584.00 72%     323,764.00 62% Gross margin     119,616.00 28%     198,436.00 38% (-)Selling and admin expenses        93,984.00 22%     114,884.00 22% Net income        25,632.00 6%        83,552.00 16%

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