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Q5SE

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Horngren'S Financial And Managerial Accounting
Found in: Page 836

Short Answer

Data for Connor, Inc. and Alto Corp. follow:

Connor Alto

Net Sales Revenue $ 13,000 $ 22,000

Cost of Goods Sold 7,917 15,730

Other Expenses 4,342 5,170

Net Income $ 741 $ 1,100

Requirements

1. Prepare common-size income statements.

2. Which company earns more net income?

3. Which company’s net income is a higher percentage of its net sales revenue?

Answer

Connor’s net Income Increases

See the step by step solution

Step by Step Solution

Step 1: Calculation of Net Income

Requirement:1

Particulars

Connor

%

Alto

%

Net Sales (a)

13,000

100.00%

22,000

100.00%

(a/a)

Less: Cost of Sales (b)

7,917

60.90%

15,730

71.50%

(b/a)

Gross profit €

5,083

39.10%

6,270

28.50%

(c/a)

Less: Other Expenses (d)

4,342

33.40%

5,170

23.50%

(d/a)

Net Income €

741

5.70%

1,100

5.00%

(e/a)

Step 2: Explanations

Requirement:2

Alto Company earns more net income as compared to Conner of $741.

Requirement:3

The Company Connor i.e., 5.70% has a higher net income Percentage of its net sales revenue as compared to Alto 5.00%

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