Horizontal analysis of income statement

For $20$Y$2,$ Macklin Inc. reported a significant decrease in net income. At the end of the year, John Mayer, the president, is presented with the following condensed comparative income statement:

Macklin Inc.

Comparative Income Statement

For the Years Ended December $31,20$Y$2$ and $20$Y$1$

Line Item Description $20$Y$220$Y$1$

Sales $$796,807$ $$731,000$

Cost of goods sold $(552,000)(460,000)$

Gross profit $$244,807$ $$271,000$

Selling expenses $$(77,500)$ $$(62,000)$

Administrative expenses $(46,020)(39,000)$

Total operating expenses $$(123,520)$ $$(101,000)$

Operating income $$121,287$ $$170,000$

Other revenue $3,9903,100$

Income before income tax expense $$125,277$ $$173,100$

Income tax expense $(35,100)(51,900)$

Net income $$90,177$ $$121,200$

Required:

Question Content Area

$1.$ Prepare a comparative income statement with horizontal analysis for the two$-$year period, using $20$Y$1$ as the base year. Use the minus sign to indicate a decrease in the "Increase$/($Decrease$)"$ columns. If required, round percentages to one decimal place.

Macklin Inc.

Comparative Income Statement

For the Years Ended December $31,20$Y$2$ and $20$Y$1$

Line Item Description

$20$Y$2$

$20$Y$1$ Increase$/$

$($Decrease$)$

Amount Increase$/$

$($Decrease$)$

Percent

Sales $$796,807$ $$731,000$ $Sales

Sales

$\%$

Cost of goods sold $(552,000)(460,000)$ Cost of goods sold

Cost of goods sold

$\%$

Gross profit $$244,807$ $$271,000$ $Gross profit

Gross profit

$\%$

Selling expenses $$(77,500)$ $$(62,000)$ $Selling expenses

Selling expenses

$\%$

Administrative expenses $(46,020)(39,000)$ Administrative expenses

Administrative expenses

$\%$

Total operating expenses $$(123,520)$ $$(101,000)$ $Total operating expenses

Total operating expenses

$\%$

Operating income $$121,287$ $$170,000$ $Operating income

Operating income

$\%$

Other revenue $3,9903,100$ Other revenue

Other revenue

$\%$

Income before income tax expense $$125,277$ $$173,100$ $Income before income tax expense

Income before income tax expense

$\%$

Income tax expense $(35,100)(51,900)$ Income tax expense

Income tax expense

$\%$

Net income $$90,177$ $$121,200$ $Net income

Net income

$\%$

Question Content Area

$2.$ Net income has fill in the blank $1$ of $4$

from $20$Y$1$ to $20$Y$2.$ Sales have fill in the blank $2$ of $4$

; however, the cost of goods sold has fill in the blank $3$ of $4$

at a faster rate than sales, causing the gross profit to fill in the blank $4$ of $4$

$.$