Question
For 20Y2, Macklin Inc. reported a significant decrease in net income. At the end of the year, John Mayer, the president, is presented with the
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For 20Y2, 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, 20Y2 and 20Y1 20Y2 20Y1 Sales $733,986 $636,000 Cost of goods sold (528,000) (400,000) Gross profit $205,986 $236,000 Selling expenses $(75,600) $(54,000) Administrative expenses (43,790) (34,000) Total operating expenses $(119,390) $(88,000) Operating income $86,596 $148,000 Other revenue 3,432 2,700 Income before income tax expense $90,028 $150,700 Income tax expense (25,200) (45,200) Net income $64,828 $105,500
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 20Y2 20Y1 Increase/ (Decrease) Amount Increase/ (Decrease) Percent Sales $733,986 $636,000 $ % Cost of goods sold (528,000) (400,000) % Gross profit $205,986 $236,000 $ % Selling expenses $(75,600) $(54,000) $ % Administrative expenses (43,790) (34,000) % Total operating expenses $(119,390) $(88,000) $ % Operating income $86,596 $148,000 $ % Other revenue 3,432 2,700 % Income before income tax expense $90,028 $150,700 $ % Income tax expense (25,200) (45,200) % Net income $64,828 $105,500 $ %
2. Net income has_____ (increase or decrease) from 20Y1 to 20Y2. Sales have _____(increase or decrease); however, the cost of goods sold has_____(increase or decrease) at a faster rate than sales, causing the gross profit to ______(increase or decrease).
For 20Y2, 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, 20Y2 and 20Y1 | |||
20Y2 | 20Y1 | ||
Sales | $733,986 | $636,000 | |
Cost of goods sold | (528,000) | (400,000) | |
Gross profit | $205,986 | $236,000 | |
Selling expenses | $(75,600) | $(54,000) | |
Administrative expenses | (43,790) | (34,000) | |
Total operating expenses | $(119,390) | $(88,000) | |
Operating income | $86,596 | $148,000 | |
Other revenue | 3,432 | 2,700 | |
Income before income tax expense | $90,028 | $150,700 | |
Income tax expense | (25,200) | (45,200) | |
Net income | $64,828 | $105,500 |
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 | ||||
20Y2 | 20Y1 | Increase/ (Decrease) Amount | Increase/ (Decrease) Percent | |
Sales | $733,986 | $636,000 | $ | % |
Cost of goods sold | (528,000) | (400,000) | % | |
Gross profit | $205,986 | $236,000 | $ | % |
Selling expenses | $(75,600) | $(54,000) | $ | % |
Administrative expenses | (43,790) | (34,000) | % | |
Total operating expenses | $(119,390) | $(88,000) | $ | % |
Operating income | $86,596 | $148,000 | $ | % |
Other revenue | 3,432 | 2,700 | % | |
Income before income tax expense | $90,028 | $150,700 | $ | % |
Income tax expense | (25,200) | (45,200) | % | |
Net income | $64,828 | $105,500 | $ | % |
2. Net income has_____ (increase or decrease) from 20Y1 to 20Y2. Sales have _____(increase or decrease); however, the cost of goods sold has_____(increase or decrease) at a faster rate than sales, causing the gross profit to ______(increase or decrease).
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