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 |
1 |
| 20Y2 | 20Y1 |
2 | Sales | $8,887,500.00 | $7,900,000.00 |
3 | Cost of goods sold | 3,265,333.00 | 2,633,333.00 |
4 | Gross profit | $5,622,167.00 | $5,266,667.00 |
5 | Selling expenses | $1,171,800.00 | $930,000.00 |
6 | Administrative expenses | 725,000.00 | 580,000.00 |
7 | Total operating expenses | $1,896,800.00 | $1,510,000.00 |
8 | Income from operations | $3,725,367.00 | $3,756,667.00 |
9 | Other income | 143,000.00 | 130,000.00 |
10 | Income before income tax | $3,868,367.00 | $3,886,667.00 |
11 | Income tax expense | 46,000.00 | 40,000.00 |
12 | Net income | $3,822,367.00 | $3,846,667.00 |
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). |
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 | $8,887,500.00 | $7,900,000.00 |
3 | Cost of goods sold | 3,265,333.00 | 2,633,333.00 |
4 | Gross profit | $5,622,167.00 | $5,266,667.00 |
5 | Selling expenses | $1,171,800.00 | $930,000.00 |
6 | Administrative expenses | 725,000.00 | 580,000.00 |
7 | Total operating expenses | $1,896,800.00 | $1,510,000.00 |
8 | Income from operations | $3,725,367.00 | $3,756,667.00 |
9 | Other income | 143,000.00 | 130,000.00 |
10 | Income before income tax | $3,868,367.00 | $3,886,667.00 |
11 | Income tax expense | 46,000.00 | 40,000.00 |
12 | Net income | $3,822,367.00 | $3,846,667.00 |
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). |
X
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 | $8,887,500.00 | $7,900,000.00 | ||
4 | Cost of goods sold | 3,265,333.00 | 2,633,333.00 | ||
5 | Gross profit | $5,622,167.00 | $5,266,667.00 | ||
6 | Selling expenses | $1,171,800.00 | $930,000.00 | ||
7 | Administrative expenses | 725,000.00 | 580,000.00 | ||
8 | Total operating expenses | $1,896,800.00 | $1,510,000.00 | ||
9 | Income from operations | $3,725,367.00 | $3,756,667.00 | ||
10 | Other income | 143,000.00 | 130,000.00 | ||
11 | Income before income tax | $3,868,367.00 | $3,886,667.00 | ||
12 | Income tax expense | 46,000.00 | 40,000.00 | ||
13 | Net income | $3,822,367.00 | $3,846,667.00 |
To the extent the data permit, comment on the significant relationships revealed by the horizontal analysis prepared in (1). Fill in the blank spaces with increased/decreased
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 .
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started