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 |
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20Y2 | 20Y1 | ||
Sales | $352,096 | $294,000 | |
Cost of goods sold | 266,000 | 190,000 | |
Gross profit | $86,096 | $104,000 | |
Selling expenses | $37,500 | $25,000 | |
Administrative expenses | 21,760 | 16,000 | |
Total operating expenses | $59,260 | $41,000 | |
Income from operations | $26,836 | $63,000 | |
Other revenue | 1,493 | 1,200 | |
Income before income tax | $28,329 | $64,200 | |
Income tax expense | 7,900 | 19,300 | |
Net income | $20,429 | $44,900 |
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 | Difference - Amount | Difference - Percent | |
Sales | $352,096 | $294,000 | $ | % |
Cost of goods sold | 266,000 | 190,000 | % | |
Gross profit | $86,096 | $104,000 | $ | % |
Selling expenses | $37,500 | $25,000 | $ | % |
Administrative expenses | 21,760 | 16,000 | % | |
Total operating expenses | $59,260 | $41,000 | $ | % |
Income from operations | $26,836 | $63,000 | $ | % |
Other revenue | 1,493 | 1,200 | % | |
Income before income tax | $28,329 | $64,200 | $ | % |
Income tax expense | 7,900 | 19,300 | % | |
Net income | $20,429 | $44,900 | $ | % |
2. Net income has from 20Y1 to 20Y2. Sales have ; however, the cost of goods sold has , causing the gross profit to .
1 | ||||
Comparative Income Statement | ||||
For the Years Ended December 31, 20Y2 and 20Y1 | ||||
20Y2 | 20Y1 | Increase (Decrease) - Amount | Increase (Decrease) - Percent | |
Sales | 352096 | 294000 | 58096 | 19.8% |
Cost of goods sold | 266000 | 190000 | 76000 | 40.0% |
Gross profit | 86096 | 104000 | -17904 | -17.2% |
Selling expenses | 37500 | 25000 | 12500 | 50.0% |
Administrative expenses | 21760 | 16000 | 5760 | 36.0% |
Total operating expenses | 59260 | 41000 | 18260 | 44.5% |
Income from operations | 26836 | 63000 | -36164 | -57.4% |
Other revenue | 1493 | 1200 | 293 | 24.4% |
Income before income tax | 28329 | 64200 | -35871 | -55.9% |
Income tax expense | 7900 | 19300 | -11400 | -59.1% |
Net income | 20429 | 44900 | -24471 | -54.5% |
2 |
Net income has decreased from 20Y1 to 20Y2. Sales have increased however, the cost of goods sold has increased,causing the gross profit to decrease |
Horizontal Analysis of Income Statement For 20Y2, McDade Company reported a decline in net income. At...
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 $486,592 $446,000 Cost of goods sold 336,000 280,000 Gross profit $150,592 $166,000 Selling expenses $47,500 $38,000 Administrative expenses 28,320 24,000 Total operating expenses $75,820 $62,000 Income from operations $74,772...
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 $647,570 $551,000 Cost of goods sold 476,000 350,000 Gross profit $171,570 $201,000 Selling expenses $66,700 $46,000 Administrative expenses 38,400 29,000 Total operating expenses $105,100 $75,000 Income from operations $66,470...
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