a. Prepare a common-sized income statement comparing the results of operations for Smith Electronics Company with the industry average Round to one decimal place. b. As far as the data permit, comment on significant relationships revealed by the comparisons.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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### Chapter 17

Revenue and expense data for the current calendar year for Smith Electronics Company and for the electronics industry are as follows. The Smith Electronics Company data are expressed in dollars. The electronics industry averages are expressed in percentages.

#### Smith Electronics Company Financial Data

| **Category**                    | **Smith Electronics Company** | **Electronics Industry Average** |
|---------------------------------|-------------------------------|---------------------------------|
| **Sales**                       | $3,142,000                    | 103.0%                          |
| **Sales returns and allowances**| $150,000                      | 100.0%                          |
| **Net sales**                   | $2,992,000                    | 98.0%                           |
| **Cost of goods sold**          | $1,850,000                    | 60.0%                           |
| **Gross profit**                | $1,142,000                    | 40.0%                           |
| **Selling expenses**            | $750,000                      | 25.0%                           |
| **Administrative expenses**     | $257,000                      | 33.0%                           |
| **Total operating expenses**    | $1,007,000                    | 33.0%                           |
| **Operating income**            | $135,000                      | 7.0%                            |
| **Other income**                | $150,000                      | 1.5%                            |
| **Other expense**               | $158,000                      | 8.5%                            |
| **Income before income tax**    | $142,500                      | 7.5%                            |
| **Income tax expense**          | $76,000                       | 5.0%                            |
| **Net income**                  | $66,500                       | 2.5%                            |

#### Tasks

**a.** Prepare a common-sized income statement comparing the results of operations for Smith Electronics Company with the industry average. Round to one decimal place.

**b.** As far as the data permit, comment on significant relationships revealed by the comparisons.

The data presented offer insights into how Smith Electronics Company compares to industry averages across key financial metrics. This information can be utilized for deeper analysis and strategic planning.
Transcribed Image Text:### Chapter 17 Revenue and expense data for the current calendar year for Smith Electronics Company and for the electronics industry are as follows. The Smith Electronics Company data are expressed in dollars. The electronics industry averages are expressed in percentages. #### Smith Electronics Company Financial Data | **Category** | **Smith Electronics Company** | **Electronics Industry Average** | |---------------------------------|-------------------------------|---------------------------------| | **Sales** | $3,142,000 | 103.0% | | **Sales returns and allowances**| $150,000 | 100.0% | | **Net sales** | $2,992,000 | 98.0% | | **Cost of goods sold** | $1,850,000 | 60.0% | | **Gross profit** | $1,142,000 | 40.0% | | **Selling expenses** | $750,000 | 25.0% | | **Administrative expenses** | $257,000 | 33.0% | | **Total operating expenses** | $1,007,000 | 33.0% | | **Operating income** | $135,000 | 7.0% | | **Other income** | $150,000 | 1.5% | | **Other expense** | $158,000 | 8.5% | | **Income before income tax** | $142,500 | 7.5% | | **Income tax expense** | $76,000 | 5.0% | | **Net income** | $66,500 | 2.5% | #### Tasks **a.** Prepare a common-sized income statement comparing the results of operations for Smith Electronics Company with the industry average. Round to one decimal place. **b.** As far as the data permit, comment on significant relationships revealed by the comparisons. The data presented offer insights into how Smith Electronics Company compares to industry averages across key financial metrics. This information can be utilized for deeper analysis and strategic planning.
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