Problem 1

Required: Express each income statement component as a percentage of

sales, and comment on the trends in each line from 2013 to 2014.
(25 points)

Sales
Cost of goods sold
Gross margin
Operating expenses
Net income

$
$
$
$
$

2014
% Sales
1,000,000
450,000
550,000
600,000
(50,000)

$
$
$
$
$

2013
% Sales
1,200,000
600,000
600,000
450,000
150,000

Comments

Problem 2
Required: Compute (1) accounts receivable turnover for 2014, (2) the inventory turnover for 2014,
and (3) the net margin for 2014.
(25 points)
2014
2013
Balance sheet items
Accounts receivable
$ 380,000.00 $ 376,000.00
Allowance for doubtful accounts
$ (20,000.00) $ (16,000.00)
Net accounts receivable
$ 360,000.00 $ 360,000.00
Inventory

480,000.00 $

440,000.00

Income statement items

Sales

$ 3,400,000.00 $ 3,080,000.00

Cost of goods sold

$ 1,600,000.00 $ 1,440,000.00

Operating expenses

780,000.00 $

680,000.00