Oakley Corporation has the following comparative income statements.Which of the following statements is false with regard to this comparative data? $\begin{array}{c}
\text { OAKLEY CORPORATION } \
\text { Comparative Income Statements } \
\text {For Years Ended December 31, 2014 and 2013 } \
\begin{array}{|l|r|r|}
\hline & { 2014 } & { 2013 } \
\hline \text { Sales } & \$ 360,000 & \$ 267,500 \
\hline \text { Cost of goods sold } & 237,600 & 140,170 \
\hline \text { Gross profit } & 122,400 & 127,330 \
\hline \text { Operating expenses } & \underline{75,600} & \underline{51,895} \
\hline \text { Net income } \quad \quad \quad& \underline{46,800} &\underline{ \$ 75,435} \
\hline
\end{array}

\end{array}$

A)The common-size sales percent for 2014 equals 100%.
B)The common-size net income percent for 2013 equals 28.04%.
C)The common-size gross profit percent for 2014 equals (3.87)%.
D)The common-size cost of goods sold for 2013 equals 52.4%.
E)The common-size operating expenses for 2014 equals.

Question

Oakley Corporation has the following comparative income statements.Which of the following statements is false with regard to this comparative data? $\begin{array}{c}
\text { OAKLEY CORPORATION } \
\text { Comparative Income Statements } \
\text {For Years Ended December 31, 2014 and 2013  } \
\begin{array}{|l|r|r|}
\hline &   { 2014 } &   { 2013 } \
\hline \text { Sales  }  & \$ 360,000 & \$ 267,500 \
\hline \text { Cost of goods sold } & 237,600 & 140,170 \
\hline \text { Gross profit } & 122,400 & 127,330 \
\hline \text { Operating expenses } & \underline{75,600} & \underline{51,895} \
\hline \text { Net income } \quad \quad \quad& \underline{46,800} &\underline{ \$ 75,435} \
\hline
\end{array}

\end{array}$

A)The common-size sales percent for 2014 equals 100%.
B)The common-size net income percent for 2013 equals 28.04%.
C)The common-size gross profit percent for 2014 equals (3.87)%.
D)The common-size cost of goods sold for 2013 equals 52.4%.
E)The common-size operating expenses for 2014 equals.

Quizplus · Accepted Answer

Common-size percentages are calculated by dividing each item by sales (total revenue). 
A) Common-size sales percent for 2014 = 100% is true because it is the base year for comparison.
B) Common-size net income percent for 2013 = 28.04% is true because it is calculated by dividing net income of 2013 by sales of 2013: $75,435/$267,500 ≈ 28.04%.
C) Common-size gross profit percent for 2014 = (3.87)% is false because it is calculated by dividing the difference between gross profit of 2014 and 2013 by sales of 2014: ($122,400-$127,330)/$360,000 ≈ (1.38)%. The correct answer is -34% because the gross profit of 2014 is lower than the gross profit of 2013, so the common-size gross profit percent should be negative, indicating the decrease.
D) Common-size cost of goods sold for 2013 = 52.4% is true because it is calculated by dividing the cost of goods sold of 2013 by sales of 2013: $140,170/$267,500 ≈ 52.4%.
E) Common-size operating expenses for 2014 cannot be calculated with the given information because we need to know the operating expenses of 2014 as a percentage of sales.

Oakley Corporation Has the Following Comparative Income Statements A)The Common-Size Sales Percent for 2014 Equals 100