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 $486,808 $446,000 Cost of goods sold 336,000 280,000 Gross profit $150,808 $166,000 Selling expenses $47,500 $38,000 Administrative expenses 28,320 24,000 Total operating expenses $75,820 $62,000 Income from operations $74,988 $104,000 Other income 2,390 1,900 Income before income tax $77,378 $105,900 Income tax expense 21,700 31,800 Net income $55,678 $74,100

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 $486,808 $446,000 $ % Cost of goods sold 336,000 280,000 % Gross profit $150,808 $166,000 $ % Selling expenses $47,500 $38,000 $ % Administrative expenses 28,320 24,000 % Total operating expenses $75,820 $62,000 $ % Income from operations $74,988 $104,000 $ % Other income 2,390 1,900 % Income before income tax $77,378 $105,900 $ % Income tax expense 21,700 31,800 % Net income $55,678 $74,100 $ %

2. Net income has from 20Y1 to 20Y2. Sales have ; however, the cost of goods sold has , causing the gross profit to .