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	$622,730		$560,000
Cost of merchandise sold	434,000		350,000
Gross profit	$188,730		$210,000
Selling expenses	$61,100		$47,000
Administrative expenses	36,480		30,000
Total operating expenses	$97,580		$77,000
Income from operations	$91,150		$133,000
Other revenue	3,046		2,400
Income before income tax expense	$94,196		$135,400
Income tax expense	26,400		40,600
Net income	$67,796		$94,800

Required:

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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. Use the minus sign to indicate a decrease in the "Difference" columns.

McDade Company Comparative Income Statement For the Years Ended December 31, 20Y2 and 20Y1

	20Y2	20Y1	Difference - Amount	Difference - Percent
Sales	$622,730	$560,000	$fill in the blank 7b88dffe007cfc6_1	fill in the blank 7b88dffe007cfc6_2%
Cost of merchandise sold	434,000	350,000	fill in the blank 7b88dffe007cfc6_3	fill in the blank 7b88dffe007cfc6_4%
Gross profit	$188,730	$210,000	$fill in the blank 7b88dffe007cfc6_5	fill in the blank 7b88dffe007cfc6_6%
Selling expenses	$61,100	$47,000	$fill in the blank 7b88dffe007cfc6_7	fill in the blank 7b88dffe007cfc6_8%
Administrative expenses	36,480	30,000	fill in the blank 7b88dffe007cfc6_9	fill in the blank 7b88dffe007cfc6_10%
Total operating expenses	$97,580	$77,000	$fill in the blank 7b88dffe007cfc6_11	fill in the blank 7b88dffe007cfc6_12%
Income from operations	$91,150	$133,000	$fill in the blank 7b88dffe007cfc6_13	fill in the blank 7b88dffe007cfc6_14%
Other revenue	3,046	2,400	fill in the blank 7b88dffe007cfc6_15	fill in the blank 7b88dffe007cfc6_16%
Income before income tax expense	$94,196	$135,400	$fill in the blank 7b88dffe007cfc6_17	fill in the blank 7b88dffe007cfc6_18%
Income tax expense	26,400	40,600	fill in the blank 7b88dffe007cfc6_19	fill in the blank 7b88dffe007cfc6_20%
Net income	$67,796	$94,800	$fill in the blank 7b88dffe007cfc6_21	fill in the blank 7b88dffe007cfc6_22%

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2. Net income has

increaseddecreased

from 20Y1 to 20Y2. Sales have

increaseddecreased

; however, the cost of merchandise sold has

increaseddecreased

, causing the gross profit to

increasedecrease