Horizontal Analysis of Income Statement

For 20Y2, 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
	20Y2		20Y1
Sales	$320,232		$294,000
Cost of goods sold	(228,000)		(190,000)
Gross profit	$92,232		$104,000
Selling expenses	$(31,250)		$(25,000)
Administrative expenses	(18,880)		(16,000)
Total operating expenses	$(50,130)		$(41,000)
Operating income	$42,102		$63,000
Other revenue	1,558		1,200
Income before income tax expense	$43,660		$64,200
Income tax expense	(12,200)		(19,300)
Net income	$31,460		$44,900

Required:

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 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, 20Y2 and 20Y1

	20Y2	20Y1	Increase/ (Decrease) Amount	Increase/ (Decrease) Percent
Sales	$320,232	$294,000	$fill in the blank 7ddceef71003059_1	fill in the blank 7ddceef71003059_2%
Cost of goods sold	(228,000)	(190,000)	fill in the blank 7ddceef71003059_3	fill in the blank 7ddceef71003059_4%
Gross profit	$92,232	$104,000	$fill in the blank 7ddceef71003059_5	fill in the blank 7ddceef71003059_6%
Selling expenses	$(31,250)	$(25,000)	$fill in the blank 7ddceef71003059_7	fill in the blank 7ddceef71003059_8%
Administrative expenses	(18,880)	(16,000)	fill in the blank 7ddceef71003059_9	fill in the blank 7ddceef71003059_10%
Total operating expenses	$(50,130)	$(41,000)	$fill in the blank 7ddceef71003059_11	fill in the blank 7ddceef71003059_12%
Operating income	$42,102	$63,000	$fill in the blank 7ddceef71003059_13	fill in the blank 7ddceef71003059_14%
Other revenue	1,558	1,200	fill in the blank 7ddceef71003059_15	fill in the blank 7ddceef71003059_16%
Income before income tax expense	$43,660	$64,200	$fill in the blank 7ddceef71003059_17	fill in the blank 7ddceef71003059_18%
Income tax expense	(12,200)	(19,300)	fill in the blank 7ddceef71003059_19	fill in the blank 7ddceef71003059_20%
Net income	$31,460	$44,900	$fill in the blank 7ddceef71003059_21	fill in the blank 7ddceef71003059_22%

2. Net income has

increaseddecreased

from 20Y1 to 20Y2. Sales have

increaseddecreased

; however, the cost of goods sold has

increaseddecreased

at a faster rate than sales, causing the gross profit to

increasedecrease

.