The following income statements were drawn from the annual report of the western sales company. year 2 year 1 sales 40,000 40,000 cost of goods sold (25,000 ) (25,000 ) gross margin 15,000 15,000 operating expenses (7,000 ) (9,000 ) operating income 8,000 6,000 gain on the sale of land 0 5,000 net income 8,000 11,000 if the trends continue, investors can expect the company's net income for year 3

$9,555

Explanation:

As for the trend provided, the year 3 Sales will also be $40,000

Cost of goods sold will be $25,000

gross margin = $15,000

Operating expenses are decreasing with time by

Thus, it will decrease with the same trend = $7,000 - 22.22% = $5,445

Rounded off

Therefore, net income = $15,000 - $5,445 = $9,555

Note: Gain on sale of land is one time event and not permanent, thus it will not be considered as part of trend.

answer(d) all of the choices are correct;

the correct answer is:     [c]:     " cyclical unemployment " .