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

1		20Y2	20Y1
2	Sales	$16,800,000.00	$15,000,000.00
3	Cost of goods sold	11,500,000.00	10,000,000.00
4	Gross profit	$5,300,000.00	$5,000,000.00
5	Selling expenses	$1,770,000.00	$1,500,000.00
6	Administrative expenses	1,220,000.00	1,000,000.00
7	Total operating expenses	$2,990,000.00	$2,500,000.00
8	Income from operations	$2,310,000.00	$2,500,000.00
9	Other income	256,950.00	225,000.00
10	Income before income tax	$2,566,950.00	$2,725,000.00
11	Income tax expense	1,413,000.00	1,500,000.00
12	Net income	$1,153,950.00	$1,225,000.00

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 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).

Income Statement

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 an amount or percent decrease. If required, round percentages to one decimal place.

McDade Company

Comparative Income Statement

For the Years Ended December 31, 20Y2 and 20Y1

1				Increase (Decrease)	Increase (Decrease)
2		20Y2	20Y1	Amount	Percent
3	Sales	$16,800,000.00	$15,000,000.00
4	Cost of goods sold	11,500,000.00	10,000,000.00
5	Gross profit	$5,300,000.00	$5,000,000.00
6	Selling expenses	$1,770,000.00	$1,500,000.00
7	Administrative expenses	1,220,000.00	1,000,000.00
8	Total operating expenses	$2,990,000.00	$2,500,000.00
9	Income from operations	$2,310,000.00	$2,500,000.00
10	Other income	256,950.00	225,000.00
11	Income before income tax	$2,566,950.00	$2,725,000.00
12	Income tax expense	1,413,000.00	1,500,000.00
13	Net income	$1,153,950.00	$1,225,000.00

Final Question

To the extent the data permit, comment on the significant relationships revealed by the horizontal analysis prepared in (1).

Net income has from 20Y1 to 20Y2. Sales have ; however, the cost of goods sold has by a percentage, causing the gross profit to at a slower pace than sales. In addition, total operating expenses have at a pace than sales, causing net income to .

Please answer questions filling in the blanks.