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 $756,616 $674,000 Cost of goods sold 541,800 430,000 Gross profit $214,816 $244,000 Selling expenses $75,530 $57,000 Administrative expenses 44,420 36,000 Total operating expenses $119,950 $93,000 Income from operations $94,866 $151,000 Other income 3,553 2,800 Income before income tax $98,419 $153,800 Income tax expense 27,600 46,100 Net income $70,819 $107,700 Required: 1. Prepare a comparative income statement with horizontal analysis for the two-year period, using 20Y1 as the base year. Use the minus sign to indicate a decrease in the "Difference" columns. If required, round to one decimal place. McDade Company Comparative Income Statement For the Years Ended December 31, 20Y2 and 20Y1 20Y2 20Y1 Difference - Amount Difference - Percent Sales $756,616 $674,000 $ 82,616 % Cost of goods sold 541,800 430,000 111,800 % Gross profit $214,816 $244,000 $ -29,184 % Selling expenses $75,530 $57,000 $ 18,530 % Administrative expenses 44,420 36,000 8,420 % Total operating expenses $119,950 $93,000 $ 26,950 % Income from operations $94,866 $151,000 $ -56,134 % Other income 3,553 2,800 753 % Income before income tax $98,419 $153,800 $ -55,381 % Income tax expense 27,600 46,100 -18,500 % Net income $70,819 $107,700 $ -60,119 % 2. Net income has decreased from 20Y1 to 20Y2. Sales have increased ; however, the cost of goods sold has increased , causing the gross profit to decrease .

Answer 1