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	$668,329		$589,000
Cost of merchandise sold	473,600		370,000
Gross profit	$194,729		$219,000
Selling expenses	$67,500		$50,000
Administrative expenses	38,810		31,000
Total operating expenses	$106,310		$81,000
Income from operations	$88,419		$138,000
Other revenue	3,103		2,500
Income before income tax expense	$91,522		$140,500
Income tax expense	25,600		42,200
Net income	$65,922		$98,300

Required:

Question Content Area

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 "Difference" columns.

McDade Company Comparative Income Statement For the Years Ended December 31, 20Y2 and 20Y1

	20Y2	20Y1	Difference - Amount	Difference - Percent
Sales	$668,329	$589,000	$fill in the blank c93bfa0f9008feb_1	fill in the blank c93bfa0f9008feb_2%
Cost of merchandise sold	473,600	370,000	fill in the blank c93bfa0f9008feb_3	fill in the blank c93bfa0f9008feb_4%
Gross profit	$194,729	$219,000	$fill in the blank c93bfa0f9008feb_5	fill in the blank c93bfa0f9008feb_6%
Selling expenses	$67,500	$50,000	$fill in the blank c93bfa0f9008feb_7	fill in the blank c93bfa0f9008feb_8%
Administrative expenses	38,810	31,000	fill in the blank c93bfa0f9008feb_9	fill in the blank c93bfa0f9008feb_10%
Total operating expenses	$106,310	$81,000	$fill in the blank c93bfa0f9008feb_11	fill in the blank c93bfa0f9008feb_12%
Income from operations	$88,419	$138,000	$fill in the blank c93bfa0f9008feb_13	fill in the blank c93bfa0f9008feb_14%
Other revenue	3,103	2,500	fill in the blank c93bfa0f9008feb_15	fill in the blank c93bfa0f9008feb_16%
Income before income tax expense	$91,522	$140,500	$fill in the blank c93bfa0f9008feb_17	fill in the blank c93bfa0f9008feb_18%
Income tax expense	25,600	42,200	fill in the blank c93bfa0f9008feb_19	fill in the blank c93bfa0f9008feb_20%
Net income	$65,922	$98,300	$fill in the blank c93bfa0f9008feb_21	fill in the blank c93bfa0f9008feb_22%

Question Content Area

2. Net income has

increaseddecreased

from 20Y1 to 20Y2. Sales have

increaseddecreased

; however, the cost of merchandise sold has

increaseddecreased

, causing the gross profit to

increasedecrease

.