Question
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
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 | $767,410 | $665,000 | |
Cost of goods sold | 554,400 | 420,000 | |
Gross profit | $213,010 | $245,000 | |
Selling expenses | $78,400 | $56,000 | |
Administrative expenses | 45,080 | 35,000 | |
Total operating expenses | $123,480 | $91,000 | |
Income from operations | $89,530 | $154,000 | |
Other revenue | 3,567 | 2,800 | |
Income before income tax | $93,097 | $156,800 | |
Income tax expense | 26,100 | 47,000 | |
Net income | $66,997 | $109,800 |
Required:
1. Prepare 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.
McDade Company | ||||
Comparative Income Statement | ||||
For the Years Ended December 31, 20Y2 and 20Y1 | ||||
20Y2 | 20Y1 | Difference - Amount | Difference - Percent | |
Sales | $767,410 | $665,000 | $ | % |
Cost of goods sold | 554,400 | 420,000 | % | |
Gross profit | $213,010 | $245,000 | $ | % |
Selling expenses | $78,400 | $56,000 | $ | % |
Administrative expenses | 45,080 | 35,000 | % | |
Total operating expenses | $123,480 | $91,000 | $ | % |
Income from operations | $89,530 | $154,000 | $ | % |
Other revenue | 3,567 | 2,800 | % | |
Income before income tax | $93,097 | $156,800 | $ | % |
Income tax expense | 26,100 | 47,000 | % | |
Net income | $66,997 | $109,800 | $ | % |
Feedback
2. Net income has
- increased
- decreased
from 20Y1 to 20Y2. Sales have
- increased
- decreased
; however, the cost of goods sold has
- increased
- decreased
, causing the gross profit to
- increase
- decrease
.
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