Question

orizontal 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	$596,682		$541,000
Cost of merchandise sold	414,800		340,000
Gross profit	$181,882		$201,000
Selling expenses	$58,650		$46,000
Administrative expenses	34,740		29,000
Total operating expenses	$93,390		$75,000
Income from operations	$88,492		$126,000
Other revenue	2,857		2,300
Income before income tax expense	$91,349		$128,300
Income tax expense	25,600		38,500
Net income	$65,749		$89,800

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	$596,682	$541,000	$fil	fill in the blank
Cost of merchandise sold	414,800	340,000	fill in the blank	fill in the blank
Gross profit	$181,882	$201,000	$fill in the blank	fill in the blank
Selling expenses	$58,650	$46,000	$fill in the blank	fill in the blank
Administrative expenses	34,740	29,000	fill in the blank	fill in the blank
Total operating expenses	$93,390	$75,000	$fill in the blank	fill in the blank
Income from operations	$88,492	$126,000	$fill in the blank	fill in the blank
Other revenue	2,857	2,300	fill in the blank	fill in the blank
Income before income tax expense	$91,349	$128,300	$fill in the blank	fill in the blank
Income tax expense	25,600	38,500	fill in the blank	fill in the blank
Net income	$65,749	$89,800	$fill in the blank	fill in the blank

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

Answer 1