Question
2. Horizontal Analysis of Income Statement For 20Y2, McDade Company reported a decline in net income. At the end of the year, T. Burrows, the
2.
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 | $731,359 | $617,000 | |
Cost of goods sold | 538,200 | 390,000 | |
Gross profit | $193,159 | $227,000 | |
Selling expenses | $76,700 | $52,000 | |
Administrative expenses | 44,290 | 33,000 | |
Total operating expenses | $120,990 | $85,000 | |
Income from operations | $72,169 | $142,000 | |
Other income | 3,320 | 2,600 | |
Income before income tax | $75,489 | $144,600 | |
Income tax expense | 21,100 | 43,400 | |
Net income | $54,389 | $101,200 |
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 | $731,359 | $617,000 | $ | % |
Cost of goods sold | 538,200 | 390,000 | % | |
Gross profit | $193,159 | $227,000 | $ | % |
Selling expenses | $76,700 | $52,000 | $ | % |
Administrative expenses | 44,290 | 33,000 | % | |
Total operating expenses | $120,990 | $85,000 | $ | % |
Income from operations | $72,169 | $142,000 | $ | % |
Other income | 3,320 | 2,600 | % | |
Income before income tax | $75,489 | $144,600 | $ | % |
Income tax expense | 21,100 | 43,400 | % | |
Net income | $54,389 | $101,200 | $ | % |
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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