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	$820,960		$731,000
Cost of merchandise sold	579,600		460,000
Gross profit	$241,360		$271,000
Selling expenses	$82,150		$62,000
Administrative expenses	48,130		39,000
Total operating expenses	$130,280		$101,000
Income from operations	$111,080		$170,000
Other revenue	3,906		3,100
Income before income tax expense	$114,986		$173,100
Income tax expense	32,200		51,900
Net income	$82,786		$121,200

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.

	20Y2	20Y1	Difference - Amount	Difference - Percent
Sales	$820,960	$731,000	$fill in the blank 04afd2046f8700f_1	fill in the blank 04afd2046f8700f_2%
Cost of merchandise sold	579,600	460,000	fill in the blank 04afd2046f8700f_3	fill in the blank 04afd2046f8700f_4%
Gross profit	$241,360	$271,000	$fill in the blank 04afd2046f8700f_5	fill in the blank 04afd2046f8700f_6%
Selling expenses	$82,150	$62,000	$fill in the blank 04afd2046f8700f_7	fill in the blank 04afd2046f8700f_8%
Administrative expenses	48,130	39,000	fill in the blank 04afd2046f8700f_9	fill in the blank 04afd2046f8700f_10%
Total operating expenses	$130,280	$101,000	$fill in the blank 04afd2046f8700f_11	fill in the blank 04afd2046f8700f_12%
Income from operations	$111,080	$170,000	$fill in the blank 04afd2046f8700f_13	fill in the blank 04afd2046f8700f_14%
Other revenue	3,906	3,100	fill in the blank 04afd2046f8700f_15	fill in the blank 04afd2046f8700f_16%
Income before income tax expense	$114,986	$173,100	$fill in the blank 04afd2046f8700f_17	fill in the blank 04afd2046f8700f_18%
Income tax expense	32,200	51,900	fill in the blank 04afd2046f8700f_19	fill in the blank 04afd2046f8700f_20%
Net income	$82,786	$121,200	$fill in the blank 04afd2046f8700f_21	fill in the blank 04afd2046f8700f_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

.