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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
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, 20Y2 and 20Y1 Sales 2012 $16,800,000 2011 $15,000,000 Cost of goods sold (11,500,000) (10,000,000) Gross profit $5,300,000 $5,000,000 Selling expenses $(1,770,000) $(1,500,000) Administrative expenses (1,220,000) (1,000,000) Total operating expenses $(2,990,000) $(2,500,000) Operating income $2,310,000 $2,500,000 Other revenue 256,950 225,000 Income before income tax expense $2,566,950 $2,725,000 Income tax expense (1,413,000) (1,500,000) Net income: $1,153,950 $1,225,000 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. 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, 20Y2 and 201 Previous Next < 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. 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, 20Y2 and 20Y1 Line Item Description Sales 2012 20Y1 Increase/(Decrease) Increase/(Decrease) Amount Cost of goods sold Gross profit Selling expenses Administrative expenses Total operating expenses Operating income Other revenue Income before income tax expense Income tax expense Net income Percent % % % % % % % % % ### % 2. To the extent the data permit, comment on the significant relationships revealed by the horizontal analysis prepared in (1). Net income has from 20Y1 to 2012. Sales have 2. To the extent the data permit, comment on the significant relationships revealed by the horizontal analysis prepared in (1). ; however, the cost of goods sold has pace than sales. In addition, total operating expenses have D the gross profit to increase at a in costs and expenses that are higher than the increase in sales have caused the net income to l causing at a faster rate than sales
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