Question
For 2016, Macklin Inc. reported a significant increase in net income. At the end of the year, John Mayer, the president, is presented with the
For 2016, Macklin Inc. reported a significant increase 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, 2016 and 2015 1 2016 2015 2 Sales $910,000.00 $700,000.00 3 Cost of goods sold 441,000.00 350,000.00 4 Gross profit $469,000.00 $350,000.00 5 Selling expenses $139,150.00 $115,000.00 6 Administrative expenses 99,450.00 85,000.00 7 Total operating expenses $238,600.00 $200,000.00 8 Income from operations $230,400.00 $150,000.00 9 Other income 65,000.00 50,000.00 10 Income before income tax $295,400.00 $200,000.00 11 Income tax expense 65,000.00 50,000.00 12 Net income $230,400.00 $150,000.00 Required: 1. Prepare a comparative income statement with horizontal analysis for the two-year period, using 2015 as the base year. Use the minus sign to indicate an amount or percent decrease. If required, round percentages to one decimal place. 2. To the extent the data permit, comment on the significant relationships revealed by the horizontal analysis prepared in (1).
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