Question
Horizontal Analysis of Income Statement For 20Y2, McDade Company reported a decline in net income. At the end of the year, T. Burrows, the president,
Horizontal Analysis of Income Statement
For 20Y2, 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 | |||
20Y2 | 20Y1 | ||
Sales | $501,094 | $418,000 | |
Cost of goods sold | 364,000 | 260,000 | |
Gross profit | $137,094 | $158,000 | |
Selling expenses | $52,500 | $35,000 | |
Administrative expenses | 29,920 | 22,000 | |
Total operating expenses | $82,420 | $57,000 | |
Income from operations | $54,674 | $101,000 | |
Other income | 2,201 | 1,800 | |
Income before income tax | $56,875 | $102,800 | |
Income tax expense | 15,900 | 30,800 | |
Net income | $40,975 | $72,000 |
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 "Difference" columns. If required, round to one decimal place.
McDade Company | ||||
Comparative Income Statement | ||||
For the Years Ended December 31, 20Y2 and 20Y1 | ||||
20Y2 | 20Y1 | Difference - Amount | Difference - Percent | |
Sales | $501,094 | $418,000 | $ | % |
Cost of goods sold | 364,000 | 260,000 | % | |
Gross profit | $137,094 | $158,000 | $ | % |
Selling expenses | $52,500 | $35,000 | $ | % |
Administrative expenses | 29,920 | 22,000 | % | |
Total operating expenses | $82,420 | $57,000 | $ | % |
Income from operations | $54,674 | $101,000 | $ | % |
Other income | 2,201 | 1,800 | % | |
Income before income tax | $56,875 | $102,800 | $ | % |
Income tax expense | 15,900 | 30,800 | % | |
Net income | $40,975 | $72,000 | $ | % |
2. Net income has from 20Y1 to 20Y2. Sales have ; however, the cost of goods sold has , causing the gross profit to .
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