Question

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	$495,121		$437,000
Cost of goods sold	358,400		280,000
Gross profit	$136,721		$157,000
Selling expenses	$49,950		$37,000
Administrative expenses	28,800		23,000
Total operating expenses	$78,750		$60,000
Income from operations	$57,971		$97,000
Other revenue	2,291		1,800
Income before income tax	$60,262		$98,800
Income tax expense	16,900		29,600
Net income	$43,362		$69,200

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	$495,121	$437,000	$	%
Cost of goods sold	358,400	280,000		%
Gross profit	$136,721	$157,000	$	%
Selling expenses	$49,950	$37,000	$	%
Administrative expenses	28,800	23,000		%
Total operating expenses	$78,750	$60,000	$	%
Income from operations	$57,971	$97,000	$	%
Other revenue	2,291	1,800		%
Income before income tax	$60,262	$98,800	$	%
Income tax expense	16,900	29,600		%
Net income	$43,362	$69,200	$	%

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

Answer 1