Sales $587,944   $532,000 Cost of goods sold 414,800   340,000 Gross profit $173,144   $192,000 Selling expenses $57,380   $45,000 Administrative expenses 33,540   28,000 Total operating expenses $90,920   $73,000 Income from operations $82,224   $119,000 Other revenue 2,644   2,200 Income before income tax $84,868   $121,200 Income tax expense 23,800   36,400 Net income $61,068   $84,800 Required: 1.  Prepare a comparative income statement with horizontal analysis for the two-year period, using 20Y1 as the base year. Round percentages to one decimal place. Use the minus sign to indicate a decrease in the “Increase (Decrease)” columns. McDade Company Comparative Income Statement For the Years Ended December 31, 20Y2 and 20Y1   20Y2 20Y1 Difference – Amount Difference – Percent Sales $587,944 $532,000 $fill in the blank 888e2a06df83fef_1 fill in the blank 888e2a06df83fef_2% Cost of goods sold 414,800 340,000 fill in the blank 888e2a06df83fef_3 fill in the blank 888e2a06df83fef_4% Gross profit $173,144 $192,000 $fill in the blank 888e2a06df83fef_5 fill in the blank 888e2a06df83fef_6% Selling expenses $57,380 $45,000 $fill in the blank 888e2a06df83fef_7 fill in the blank 888e2a06df83fef_8% Administrative expenses 33,540 28,000 fill in the blank 888e2a06df83fef_9 fill in the blank 888e2a06df83fef_10% Total operating expenses $90,920 $73,000 $fill in the blank 888e2a06df83fef_11 fill in the blank 888e2a06df83fef_12% Income from operations $82,224 $119,000 $fill in the blank 888e2a06df83fef_13 fill in the blank 888e2a06df83fef_14% Other revenue 2,644 2,200 fill in the blank 888e2a06df83fef_15 fill in the blank 888e2a06df83fef_16% Income before income tax $84,868 $121,200 $fill in the blank 888e2a06df83fef_17 fill in the blank 888e2a06df83fef_18% Income tax expense 23,800 36,400 fill in the blank 888e2a06df83fef_19 fill in the blank 888e2a06df83fef_20% Net income $61,068 $84,800 $fill in the blank 888e2a06df83fef_21 fill in the blank 888e2a06df83fef_22%                     2.  Net income has   from 20Y1 to 20Y2. Sales have  ; however, the cost of goods sold has  , causing the gross profit to  .

 

Horizontal Analysis of Income Statement

For 20Y2, McDade Company reported a decline in net income. At the end of the year, T. Burrows, the president, is presented with the following condensed comparative income statement:

McDade Company
Comparative Income Statement
For the Years Ended December 31, 20Y2 and 20Y1
  20Y2   20Y1
Sales $587,944   $532,000
Cost of goods sold 414,800   340,000
Gross profit $173,144   $192,000
Selling expenses $57,380   $45,000
Administrative expenses 33,540   28,000
Total operating expenses $90,920   $73,000
Income from operations $82,224   $119,000
Other revenue 2,644   2,200
Income before income tax $84,868   $121,200
Income tax expense 23,800   36,400
Net income $61,068   $84,800

Required:

1.  Prepare a comparative income statement with horizontal analysis for the two-year period, using 20Y1 as the base year. Round percentages to one decimal place. Use the minus sign to indicate a decrease in the “Increase (Decrease)” columns.

McDade Company
Comparative Income Statement
For the Years Ended December 31, 20Y2 and 20Y1
  20Y2 20Y1 Difference – Amount Difference – Percent
Sales $587,944 $532,000 $fill in the blank 888e2a06df83fef_1 fill in the blank 888e2a06df83fef_2%
Cost of goods sold 414,800 340,000 fill in the blank 888e2a06df83fef_3 fill in the blank 888e2a06df83fef_4%
Gross profit $173,144 $192,000 $fill in the blank 888e2a06df83fef_5 fill in the blank 888e2a06df83fef_6%
Selling expenses $57,380 $45,000 $fill in the blank 888e2a06df83fef_7 fill in the blank 888e2a06df83fef_8%
Administrative expenses 33,540 28,000 fill in the blank 888e2a06df83fef_9 fill in the blank 888e2a06df83fef_10%
Total operating expenses $90,920 $73,000 $fill in the blank 888e2a06df83fef_11 fill in the blank 888e2a06df83fef_12%
Income from operations $82,224 $119,000 $fill in the blank 888e2a06df83fef_13 fill in the blank 888e2a06df83fef_14%
Other revenue 2,644 2,200 fill in the blank 888e2a06df83fef_15 fill in the blank 888e2a06df83fef_16%
Income before income tax $84,868 $121,200 $fill in the blank 888e2a06df83fef_17 fill in the blank 888e2a06df83fef_18%
Income tax expense 23,800 36,400 fill in the blank 888e2a06df83fef_19 fill in the blank 888e2a06df83fef_20%
Net income $61,068 $84,800 $fill in the blank 888e2a06df83fef_21 fill in the blank 888e2a06df83fef_22%
         
         

2.  Net income has   from 20Y1 to 20Y2. Sales have  ; however, the cost of goods sold has  , causing the gross profit to  .

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