Question

A common size income statement for Creek Enterprises 2018 operations follows. Using the firms 2019 income statement presented in 3-16, develop the 2019 common size income statement and compare it with the 2018 statement. (I don't know how to get the answers for the 2019 common size income statement)

2018 common size income statement:

Sales Revenue ($35,000,000)	100%
Less: Cost of goods sold	65.9
Gross Profits	34.1
Less: Operating expenses
Selling expense	12.7%
General and administrative expenses	6.3
Lease expense	0.6
Depreciation expense	3.6
Total operating expense	23.2%
Operating profits	10.9%
Less: Interest expense	1.5
Net profits before taxes	9.4%
Less: Taxes (rate=40%)	3.8
Net profits after taxes	5.6%
Less: Preferred stock dividends	0.1
Earnings available for common stockholders	5.5%

3-16 Income Statement:

Sales Revenue	30,000,000
Less: cost of goods sold	21,000,000
gross profits	9,000,000
Less: operating expenses
selling expense	3,000,000
general and administrative expenses	1,800,000
Lease expense	200,000
Depreciation expense	1,000,000
total operating expense	6,000,000
operating profits	3,000,000
less:interest expense	1,000,000
net profits before taxes	2,000,000
Less: taxes (rate=40%)	800,000
net profits after taxes	1,200,000
Less: preferred stock dividends	100,000
Earnings available for common stockholders	1,100,000

Answer 1

2019 common size income statement and comparison with 2018 Common size income statement
	2019			2018	Comparison
	Amount	%		%	Increase / (Decrease)
Sales Revenue	30,000,000	100.0%		100.0%	0.0%
Less: cost of goods sold	21,000,000	70.0%		65.9%	4.1%
gross profits	9,000,000	30.0%		34.1%	-4.1%
Less: operating expenses
selling expense	3,000,000	10.0%		12.7%	-2.7%
general and administrative expenses	1,800,000	6.0%		6.3%	-0.3%
Lease expense	200,000	0.7%		0.6%	0.1%
Depreciation expense	1,000,000	3.3%		3.6%	-0.3%
total operating expense	6,000,000	20.0%		23.2%	-3.2%
operating profits	3,000,000	10.0%		10.9%	-0.9%
less:interest expense	1,000,000	3.3%		1.5%	1.8%
net profits before taxes	2,000,000	6.7%		9.4%	-2.7%
Less: taxes (rate=40%)	800,000	2.7%		3.8%	-1.1%
net profits after taxes	1,200,000	4.0%		5.6%	-1.6%
Less: preferred stock dividends	100,000	0.3%		0.1%	0.2%
Earnings available for common stockholders	1,100,000	3.7%		5.5%	-1.8%