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	$745,144		$646,000
Cost of merchandise sold	541,200		410,000
Gross profit	$203,944		$236,000
Selling expenses	$75,600		$54,000
Administrative expenses	43,790		34,000
Total operating expenses	$119,390		$88,000
Income from operations	$84,554		$148,000
Other revenue	3,467		2,700
Income before income tax expense	$88,021		$150,700
Income tax expense	24,600		45,200
Net income	$63,421		$105,500

Required:

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	$745,144	$646,000	$fill in the blank 5007d606ff9c070_1	fill in the blank 5007d606ff9c070_2%
Cost of merchandise sold	541,200	410,000	fill in the blank 5007d606ff9c070_3	fill in the blank 5007d606ff9c070_4%
Gross profit	$203,944	$236,000	$fill in the blank 5007d606ff9c070_5	fill in the blank 5007d606ff9c070_6%
Selling expenses	$75,600	$54,000	$fill in the blank 5007d606ff9c070_7	fill in the blank 5007d606ff9c070_8%
Administrative expenses	43,790	34,000	fill in the blank 5007d606ff9c070_9	fill in the blank 5007d606ff9c070_10%
Total operating expenses	$119,390	$88,000	$fill in the blank 5007d606ff9c070_11	fill in the blank 5007d606ff9c070_12%
Income from operations	$84,554	$148,000	$fill in the blank 5007d606ff9c070_13	fill in the blank 5007d606ff9c070_14%
Other revenue	3,467	2,700	fill in the blank 5007d606ff9c070_15	fill in the blank 5007d606ff9c070_16%
Income before income tax expense	$88,021	$150,700	$fill in the blank 5007d606ff9c070_17	fill in the blank 5007d606ff9c070_18%
Income tax expense	24,600	45,200	fill in the blank 5007d606ff9c070_19	fill in the blank 5007d606ff9c070_20%
Net income	$63,421	$105,500	$fill in the blank 5007d606ff9c070_21	fill in the blank 5007d606ff9c070_22%

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

.