Question

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	$361,360		$304,000
Cost of goods sold	262,200		190,000
Gross profit	$99,160		$114,000
Selling expenses	$38,350		$26,000
Administrative expenses	21,470		16,000
Total operating expenses	$59,820		$42,000
Income from operations	$39,340		$72,000
Other revenue	1,580		1,300
Income before income tax	$40,920		$73,300
Income tax expense	11,500		22,000
Net income	$29,420		$51,300

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 "Increase (Decrease)" columns.

McDade Company
Comparative Income Statement
For the Years Ended December 31, 20Y2 and 20Y1
	20Y2	20Y1	Increase (Decrease) - Amount	Increase (Decrease) - Percent
Sales	$361,360	$304,000	$	%
Cost of goods sold	262,200	190,000		%
Gross profit	$99,160	$114,000	$	%
Selling expenses	$38,350	$26,000	$	%
Administrative expenses	21,470	16,000		%
Total operating expenses	$59,820	$42,000	$	%
Income from operations	$39,340	$72,000	$	%
Other revenue	1,580	1,300		%
Income before income tax	$40,920	$73,300	$	%
Income tax expense	11,500	22,000		%
Net income	$29,420	$51,300	$	%

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

Answer 1