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The following financial information is given.   Year 1   Year 2   Book value of assets $18,000 $26,000 Market value of equity 18,000 60,000   12 months ended Year 1   12 months ended Year 2   Sales $  1,000 $  1,300 Cost of goods sold 500   700   Operating income 500 600 Depreciation expense 200 200 Interest expense 100   100   Pretax income 200 300 Income tax expense 80   120   Net income $     120   $     180   Using a common-size income statement, did operating income and net income increase or decrease?   Operating income     Net income     A. Increased   Decreased   B. Decreased   Decreased   C. Decreased   Increased   D. Increased   Increased

The following financial information is given.   Year 1   Year 2   Book value of assets $18,000 $26,000 Market value of equity 18,000 60,000   12 months ended Year 1   12 months ended Year 2   Sales $  1,000 $  1,300 Cost of goods sold 500   700   Operating income 500 600 Depreciation expense 200 200 Interest expense 100   100   Pretax income 200 300 Income tax expense 80   120   Net income $     120   $     180   Using a common-size income statement, did operating income and net income increase or decrease?   Operating income     Net income     A. Increased   Decreased   B. Decreased   Decreased   C. Decreased   Increased   D. Increased   Increased

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question

The following financial information is given.

 
Year 1
 
Year 2
 
Book value of assets
$18,000
$26,000
Market value of equity
18,000
60,000
 
12 months ended Year 1
 
12 months ended Year 2
 
Sales
$  1,000
$  1,300
Cost of goods sold
500
 
700
 
Operating income
500
600
Depreciation expense
200
200
Interest expense
100
 
100
 
Pretax income
200
300
Income tax expense
80
 
120
 
Net income
$     120
 
$     180
 

Using a common-size income statement, did operating income and net income increase or decrease?

 

  • Operating income
     
     
    Net income
     
     
  • A.
    Increased
     
    Decreased
     
  • B.
    Decreased
     
    Decreased
     
  • C.
    Decreased
     
    Increased
     
  • D.
    Increased
     
    Increased
     
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