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: Question not attempted.
McDade Company
Comparative Income Statement
For the Years Ended December 31, 20Y2 and 20Y1
1 20Y2 20Y1
2 Sales $16,800,000.00 $15,000,000.00
3 Cost of goods sold 11,500,000.00 10,000,000.00
4 Gross profit $5,300,000.00 $5,000,000.00
5 Selling expenses $1,770,000.00 $1,500,000.00
6 Administrative
expenses 1,220,000.00 1,000,000.00
7 Total operating
expenses $2,990,000.00 $2,500,000.00
8 Income from
operations $2,310,000.00 $2,500,000.00
9 Other income 256,950.00 225,000.00
10 Income before
income tax $2,566,950.00 $2,725,000.00
11 Income tax expense 1,413,000.00 1,500,000.00
12 Net income $1,153,950.00 $1,225,000.00
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 an amount or percent decrease. If required, round percentages to one decimal place.
2. To the extent the data permit, comment on the significant relationships revealed by the horizontal analysis prepared in (1).