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Horizontal analysis of income statement For 2012, McDade Company reported a decline in net income. At the end of the year, T. Burrows, the president,
Horizontal analysis of income statement For 2012, 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, 2012 and Sales Cost of goods sold Gruss profit Administrative expenses Operating Income Other revenue Income before income tax expense Income tax expense Net income 20Y1 2012 $16,800,000 2011 $15,000,000 (11,500,000) (10,000,000) $5.300,000 $5,000,000 $1,770,000) $1,500,000 (1,220,000) (1,000,000) $(2,990,000) $2,500,000) $2,310,000 $2,500,000 256,950 $2.566,950 225,000 $2,725,000 (1.413,000) (1,500,000) $1,153,950 $1,225,000 1. Prepare a comparative income statement with horizontal analysis for the two-year period, using 2011 as the base year. Round percentages to one decimal place. For those boxes in which you must enter subtracted or negative numbers use a minus sign. McDade Company Comparative Income Statement For the Years Ended December 31, 2012 and 20Y1 Sales Cost of goods sold Graft Administrative expenses Total operating expenses Operating income Other revenue Income before income tax expense Income tax expense 2012 2011 Increase/(Decrease) 2. To the extent the data permit, comment on the significant relationships revealed by the horizontal analysis prepared in (1). Net income has from 2011 to 2012. Sales have the cost of goods sold has ; however, causing the gross profit to increase at a pace than sales. In addition, total operating expenses have at a faster rate than sales. U in costs and expenses that are higher than the increase in sales have caused the net income to
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