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Horizontal analysis of income statement For 2012, Macklin Inc. reported a significant decrease in net income. At the end of the year, John Mayer, the
Horizontal analysis of income statement For 2012, 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, 20Y2 and 20Y1 Sales Cost of goods sold 20Y2 20Y1 $466,670 $408,000 (338,000) (260,000) Gross profit Selling expenses Administrative expenses $128,670 $148,000 $(46,750) $(34,000) Total operating expenses (27,940) (22,000) $(74,690) $(56,000) Operating income Other revenue $53,980 2,151 $92,000 1,700 Income before income tax expense $56,131 $93,700 Income tax expense (15,700) (28,100) $40,431 $65,600 Net income Required: 1. Prepare a comparative income statement with horizontal analysis for the two-year period, using 2011 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, 2012 and 20Y1 Increase/ Increase/ (Decrease) (Decrease) Amount Percent Line Item Description 20Y2 Sales Cost of goods sold 20Y1 $466,670 $408,000 (338,000) (260,000) % % Gross profit Selling expenses $128,670 $148,000 $(46,750) $(34,000) % Administrative expenses (27,940) (22,000) % Total operating expenses $(74,690) $(56,000) % Operating income $53,980 $92,000 % Other revenue 2,151 1,700 % Income before income tax expense $56,131 $93,700 % Income tax expense (15,700) (28,100) % Net income $40,431 $65,600 % 2. Net income has from 2011 to 2012. Sales have ; however, the cost of goods sold has at a faster rate than sales, causing the gross profit to
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