Question

1. For 20Y2, Macklin Inc. reported a significant decrease in net income. At the end of the year, John Mayer, the president, is presented with the following condensed comparative income statement:

   Macklin Inc. Comparative Income Statement For the Years Ended December 31, 20Y2 and 20Y1
   	20Y2		20Y1
   Sales	$733,986		$636,000
   Cost of goods sold	(528,000)		(400,000)
   Gross profit	$205,986		$236,000
   Selling expenses	$(75,600)		$(54,000)
   Administrative expenses	(43,790)		(34,000)
   Total operating expenses	$(119,390)		$(88,000)
   Operating income	$86,596		$148,000
   Other revenue	3,432		2,700
   Income before income tax expense	$90,028		$150,700
   Income tax expense	(25,200)		(45,200)
   Net income	$64,828		$105,500

   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 "Increase/(Decrease)" columns. If required, round percentages to one decimal place.

   Macklin Inc.
   Comparative Income Statement
   For the Years Ended December 31, 20Y2 and 20Y1
   	20Y2	20Y1	Increase/ (Decrease) Amount	Increase/ (Decrease) Percent
   Sales	$733,986	$636,000	$	%
   Cost of goods sold	(528,000)	(400,000)		%
   Gross profit	$205,986	$236,000	$	%
   Selling expenses	$(75,600)	$(54,000)	$	%
   Administrative expenses	(43,790)	(34,000)		%
   Total operating expenses	$(119,390)	$(88,000)	$	%
   Operating income	$86,596	$148,000	$	%
   Other revenue	3,432	2,700		%
   Income before income tax expense	$90,028	$150,700	$	%
   Income tax expense	(25,200)	(45,200)		%
   Net income	$64,828	$105,500	$	%

   2. Net income has_____ (increase or decrease) from 20Y1 to 20Y2. Sales have _____(increase or decrease); however, the cost of goods sold has_____(increase or decrease) at a faster rate than sales, causing the gross profit to ______(increase or decrease).

Answer 1

Particular	increase amount	increase %
Sales	$97986	15.4%
Cost of goods sold	$128000	32%
Gross profit	- $30104	- 12.8%
Selling expense	$21600	40%
Administration expense	$9790	28.8%
Total operating expenses	$31390	35.7%
Operating income	- $61404	-41.5%
Other revenue	$732	27.1%
Income before income tax	-$60672	-40.3%
Income tax	-$20000	-44.2%
Net income	-$40672	-38.6%

2. Net income has decreased from 20Y1 to 20Y2. Sales have increased ; however, the cost of goods sold has increased at a faster rate than sales, causing the gross profit to decrease.

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