Answer:
KORBIN COMPANY
Common Size Comparative Income Statements
For Years Ended December 31, 2017, 2016, and 2015
2017 % 2016 % 2015 %
Sales $ 555,000 100 $340,000 100 $278,000 100
Cost of goods sold 283,500 51.1 212,500 62.5 153,900 55.4
Gross profit 271,500 48.9 127,500 37.5 124,100 44.6
Selling expenses 102,900 18.5 46,920 13.8 50,800 18.3
Administrative expenses 50,668 9.1 29,920 8.8 22,800 6.0
Total expenses 153,568 27.7 76,840 22.6 73,600 26.5
Income before taxes 117,932 21.2 50,660 14.9 50,500 18.2
Income taxes 40,800 7.4 10,370 3.1 15,670 5.6
Net income $ 77,132 13.9 $40,290 11.9 $34,830 12.5
Explanation:
a) Data and Calculations:
KORBIN COMPANY
Common Size Comparative Income Statements
For Years Ended December 31, 2017, 2016, and 2015
2017 % 2016 % 2015 %
Sales $ 555,000 100 $340,000 100 $278,000 100
Cost of goods sold 283,500 51.1 212,500 62.5 153,900 55.4
Gross profit 271,500 48.9 127,500 37.5 124,100 44.6
Selling expenses 102,900 18.5 46,920 13.8 50,800 18.3
Administrative expenses 50,668 9.1 29,920 8.8 22,800 6.0
Total expenses 153,568 27.7 76,840 22.6 73,600 26.5
Income before taxes 117,932 21.2 50,660 14.9 50,500 18.2
Income taxes 40,800 7.4 10,370 3.1 15,670 5.6
Net income $ 77,132 13.9 $40,290 11.9 $34,830 12.5
KORBIN COMPANY
Comparative Balance Sheets
December 31, 2017, 2016, and 2015
2017 2016 2015
Assets
Current assets $ 52,390 $37,924 $51,748
Long-term investments 0 500 3,950
Plant assets, net 100,000 96,000 60,000
Total assets $152,390 $134,424 $115,698
Liabilities and Equity
Current liabilities $22,800 $19,960 $20,300
Common stock 72,000 72,000 60,000
Other paid-in capital 9,000 9,000 6,000
Retained earnings 48,590 33,464 29,398
Total liabilities and equity $152,390 $134,424 $115,698
b) Korbin's common size income statement shows each line item expressed as a percentage of the revenue or sales value. This analysis of individual financial statement items is also known as a vertical analysis of the financial statement, making line items comparison to a common base easy.
