Horizontal Analysis of Income Statement For 20Y2, McDade Company reported a decl

Question

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:

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 Sales $394,117 $361,000 Cost of goods sold 276,000 230,000 Gross profit $118,117 $131,000 Selling expenses $37,500 $30,000 Administrative expenses 22,420 19,000 Total operating expenses $59,920 $49,000 Income from operations $58,197 $82,000 Other income 1,886 1,500 Income before income tax $60,083 $83,500 Income tax expense 16,800 25,100 Net income $43,283 $58,400

Explanation / Answer

McDade Company Comparative Income Statement For the Years Ended December 31, 20Y2 and 20Y1 20Y2 20Y1 Difference - Amount Difference - Percent Sales $394,117 $361,000 $33,117 9.17% 394117-361000 33117/361000 = 9.17% Cost of goods sold 276,000 230,000 $46,000 20.00% Gross profit $118,117 $131,000 ($12,883) -9.83% Selling expenses $37,500 $30,000 $7,500 25.00% Administrative expenses 22,420 19,000 $3,420 18.00% Total operating expenses $59,920 $49,000 $10,920 22.29% Income from operations $58,197 $82,000 ($23,803) -29.03% Other income 1,886 1,500 $386 25.73% Income before income tax $60,083 $83,500 ($23,417) -28.04% Income tax expense 16,800 25,100 ($8,300) -33.07% Net income $43,283 $58,400 ($15,117) -25.89%

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