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 | $8,251,000.00 | $7,400,000.00 |
3 | Cost of goods sold | 3,034,000.00 | 2,466,667.00 |
4 | Gross profit | $5,217,000.00 | $4,933,333.00 |
5 | Selling expenses | $1,033,200.00 | $820,000.00 |
6 | Administrative expenses | 667,800.00 | 530,000.00 |
7 | Total operating expenses | $1,701,000.00 | $1,350,000.00 |
8 | Income from operations | $3,516,000.00 | $3,583,333.00 |
9 | Other income | 144,300.00 | 130,000.00 |
10 | Income before income tax | $3,660,300.00 | $3,713,333.00 |
11 | Income tax expense | 59,000.00 | 50,000.00 |
12 | Net income | $3,601,300.00 | $3,663,333.00 |
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). |
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 | $8,251,000.00 | $7,400,000.00 | ||
4 | Cost of goods sold | 3,034,000.00 | 2,466,667.00 | ||
5 | Gross profit | $5,217,000.00 | $4,933,333.00 | ||
6 | Selling expenses | $1,033,200.00 | $820,000.00 | ||
7 | Administrative expenses | 667,800.00 | 530,000.00 | ||
8 | Total operating expenses | $1,701,000.00 | $1,350,000.00 | ||
9 | Income from operations | $3,516,000.00 | $3,583,333.00 | ||
10 | Other income | 144,300.00 | 130,000.00 | ||
11 | Income before income tax | $3,660,300.00 | $3,713,333.00 | ||
12 | Income tax expense | 59,000.00 | 50,000.00 | ||
13 | Net income | $3,601,300.00 | $3,663,333.00 |
|
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