For 20Y2, 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:

Line Item Description	20Y2	20Y1
Sales	$910,000	$700,000
Cost of goods sold	(441,000)	(350,000)
Gross profit	$469,000	$350,000
Selling expenses	$(139,150)	$(115,000)
Administrative expenses	(99,450)	(85,000)
Total operating expenses	$(238,600)	$(200,000)
Operating income	$230,400	$150,000
Other revenue	65,000	50,000
Income before income tax expense	$295,400	$200,000
Income tax expense	(65,000)	(50,000)
Net income	$230,400	$150,000

Required:

Question Content Area

1. Create a comparative income statement with horizontal analysis for the two-year period, using 20Y1 as the base year. Round percentages to one decimal place. Use the minus sign to indicate a decrease in the "Increase/(Decrease)" columns.

Line Item Description	20Y2	20Y1	Increase/ (Decrease) Amount	Increase/ (Decrease) Percent
Sales	$910,000	$700,000	$Sales	Sales%
Cost of goods sold	(441,000)	(350,000)	Cost of goods sold	Cost of goods sold%
Gross profit	$469,000	$350,000	$Gross profit	Gross profit%
Selling expenses	$(139,150)	$(115,000)	$Selling expenses	Selling expenses%
Administrative expenses	(99,450)	(85,000)	Administrative expenses	Administrative expenses%
Total operating expenses	$(238,600)	$(200,000)	$Total operating expenses	Total operating expenses%
Operating income	$230,400	$150,000	$Operating income	Operating income%
Other revenue	65,000	50,000	Other revenue	Other revenue%
Income before income tax expense	$295,400	$200,000	$Income before income tax expense	Income before income tax expense%
Income tax expense	(65,000)	(50,000)	Income tax expense	Income tax expense%
Net income	$230,400	$150,000	$Net income	Net income%

2. Fill in the Blank.

Net income has

decreased

increased

from 20Y1 to 20Y2. Net sales have

increased

decreased

; however, cost of goods sold, selling, and administrative expenses have

decreased

increased

at a

faster

slower

rate, causing

strong earnings growth

weak earnings growth

.