According to the producer price index database maintained by the Bureau of Labor Statistics, the average cost of computer equipment fell 3.8 percent between January and December 2018. Let's see whether these changes are reflected in the income statement of Gonzalez Industries for the year ended December 31, 2018. Sales Revenue Cost of Goods Sold Gross Profit Selling, General, and Administrative Expenses Interest Expense Income before Income Tax Expense Income Tax Expense Net Income 2018 $ 105,000 62,500 42,500 36,500 2017 $ 127,500 73,500 54,000 38,000 500 550 5,450 1,500 $ 3,950 $ 10,000 15,500 5,500 Required: 1. Compute the gross profit percentage for each year. Assuming the change from 2017 to 2018 is the beginning of a sustained trend, is Gonzalez likely to earn more or less gross profit from each dollar of sales in 2019? 2. Compute the net profit margin for each year. Did Gonzalez do a better or worse job of controlling operating expenses in 2018 relative to 2017? 3. Gonzalez reported average net fixed assets of $54,700 in 2018 and $45,600 in 2017. Compute the fixed asset turnover ratios for both years. Did the company better utilize its investment in fixed assets to generate revenues in 2018 or 2017? 4. Gonzalez reported average stockholders' equity of $54,500 in 2018 and $41,300 in 2017. The company has not issued preferred stock. Compute the return on equity ratios for both years. Did the company generate greater returns for stockholders in 2018 than in 2017?

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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According to the producer price index database maintained by the Bureau of Labor Statistics, the average cost of computer equipment
fell 3.8 percent between January and December 2018. Let's see whether these changes are reflected in the income statement of
Gonzalez Industries for the year ended December 31, 2018.
Sales Revenue
Cost of Goods Sold
Gross Profit
Selling, General, and Administrative Expenses
Interest Expense
Income before Income Tax Expense
Income Tax Expense
Net Income
Required 1
Required:
1. Compute the gross profit percentage for each year. Assuming the change from 2017 to 2018 is the beginning of a sustained trend, is
Gonzalez likely to earn more or less gross profit from each dollar of sales in 2019?
2. Compute the net profit margin for each year. Did Gonzalez do a better or worse job of controlling operating expenses in 2018
relative to 2017?
Required 2
2018
$ 105,000
62,500
42,500
36,500
3. Gonzalez reported average net fixed assets of $54,700 in 2018 and $45,600 in 2017. Compute the fixed asset turnover ratios for
both years. Did the company better utilize its investment in fixed assets to generate revenues in 2018 or 2017?
4. Gonzalez reported average stockholders' equity of $54,500 in 2018 and $41,300 in 2017. The company has not issued preferred
stock. Compute the return on equity ratios for both years. Did the company generate greater returns for stockholders in 2018 than
in 2017?
Required 3
550
5,450
1,500
$ 3,950
Complete this question by entering your answers in the tabs below.
Required 4
2-a. 2017 net profit margin percentage
2-a. 2018 net profit margin percentage
2-b. Controlling operating expenses in 2018 vs 2017?
2017
$ 127,500
73,500
54,000
38,000
500
15,500
5,500
$ 10,000
Answer is not complete.
2-a. Compute the net profit margin for each year.
Note: Round percentage values to 1 decimal place.
2-b. Did Gonzalez do a better or worse job of controlling operating expenses in 2018 relative to 2017?
3.8 X %
7.8 X %
Worse Job
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Transcribed Image Text:According to the producer price index database maintained by the Bureau of Labor Statistics, the average cost of computer equipment fell 3.8 percent between January and December 2018. Let's see whether these changes are reflected in the income statement of Gonzalez Industries for the year ended December 31, 2018. Sales Revenue Cost of Goods Sold Gross Profit Selling, General, and Administrative Expenses Interest Expense Income before Income Tax Expense Income Tax Expense Net Income Required 1 Required: 1. Compute the gross profit percentage for each year. Assuming the change from 2017 to 2018 is the beginning of a sustained trend, is Gonzalez likely to earn more or less gross profit from each dollar of sales in 2019? 2. Compute the net profit margin for each year. Did Gonzalez do a better or worse job of controlling operating expenses in 2018 relative to 2017? Required 2 2018 $ 105,000 62,500 42,500 36,500 3. Gonzalez reported average net fixed assets of $54,700 in 2018 and $45,600 in 2017. Compute the fixed asset turnover ratios for both years. Did the company better utilize its investment in fixed assets to generate revenues in 2018 or 2017? 4. Gonzalez reported average stockholders' equity of $54,500 in 2018 and $41,300 in 2017. The company has not issued preferred stock. Compute the return on equity ratios for both years. Did the company generate greater returns for stockholders in 2018 than in 2017? Required 3 550 5,450 1,500 $ 3,950 Complete this question by entering your answers in the tabs below. Required 4 2-a. 2017 net profit margin percentage 2-a. 2018 net profit margin percentage 2-b. Controlling operating expenses in 2018 vs 2017? 2017 $ 127,500 73,500 54,000 38,000 500 15,500 5,500 $ 10,000 Answer is not complete. 2-a. Compute the net profit margin for each year. Note: Round percentage values to 1 decimal place. 2-b. Did Gonzalez do a better or worse job of controlling operating expenses in 2018 relative to 2017? 3.8 X % 7.8 X % Worse Job < Prev 7 of 7 Next
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