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1. 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	$876,180		$750,000
   Cost of goods sold	629,800		470,000
   Gross profit	$246,380		$280,000
   Selling expenses	$89,780		$63,000
   Administrative expenses	52,240		40,000
   Total operating expenses	$142,020		$103,000
   Income from operations	$104,360		$177,000
   Other income	3,850		3,200
   Income before income tax	$108,210		$180,200
   Income tax expense	30,300		54,100
   Net income	$77,910		$126,100

   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	Difference - Amount	Difference - Percent
   Sales	$876,180	$750,000	$	%
   Cost of goods sold	629,800	470,000		%
   Gross profit	$246,380	$280,000	$	%
   Selling expenses	$89,780	$63,000	$	%
   Administrative expenses	52,240	40,000		%
   Total operating expenses	$142,020	$103,000	$	%
   Income from operations	$104,360	$177,000	$	%
   Other income	3,850	3,200		%
   Income before income tax	$108,210	$180,200	$	%
   Income tax expense	30,300	54,100		%
   Net income	$77,910	$126,100	$	%

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   2. Net income has

   • increased
   • decreased
   from 20Y1 to 20Y2. Sales have
   • increased
   • decreased
   ; however, the cost of goods sold has
   • increased
   • decreased
   , causing the gross profit to
   • increase
   • decrease
   .

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