Question
For 2012, Macklin Inc. reported a significant decrease in net income. At the end of the year, John Mayer, the president, is presented with
For 2012, Macklin Inc. reported a significant decrease in net income. At the end of the year, John Mayer, the president, is presented with the following condensed comparative income statement: Macklin Inc. Comparative Income Statement For the Years Ended December 31, 2012 and 20Y1 Sales Cost of goods sold Gross profit Selling expenses Administrative expenses 20Y2 20Y1 $331,888 $304,000 (228,000) (190,000) $103,888 $114,000 $(32,500) $(26,000) (18,880) (16,000) Total operating expenses $(51,380) $(42,000) Operating income $52,508 $72,000 Other revenue 1,634 1,300 Income before income tax expense. $54,142 $73,300 Income tax expense (15,200) (22,000) $38,942 $51,300 Net income 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 "Increase/(Decrease)" columns. If required, round percentages to one decimal place. Macklin Inc. Comparative Income Statement For the Years Ended December 31, 20Y2 and 20Y1 Increase/ Increase/ (Decrease) (Decrease) Amount Percent Line Item Description 20Y2 20Y1 Sales $331,888 27,888 $304,000 % Cost of goods sold (228,000) (190,000) % Gross profit $103,888 $114,000 % Selling expenses Administrative expenses $(32,500) $(26,000) 1% (18,880) (16,000) % Total operating expenses Operating income $(51,380) $(42,000) $52,508 $72,000 Other revenue 1,634 1,300 % Income before income tax expense $54,142 $73,300 Income tax expense (15,200) (22,000) Net income $38,942 $51,300 % 2. Net income has i from 20Y1 to 20Y2. Sales have! at a faster rate than sales, causing the gross profit to however, the cost of goods sold has
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