Horizontal analysis of income statementFor 20Y2, Macklin Inc. reported a significant increase in net income. At the end of the year, John Mayer, the president, is presented with the following condensed comparitive income statement: McDade Company Comparative Income StatementFor the Years Ended December 31, 20Y2 and 20Y1 20Y220Y1Sales$910, 000$700,000Cost of goods sold 441,000350,000Gross Profit$469,000350,000Selling expenses$139,150$115,000Administrative expenses99,45085,000Total operating expenses $238,600$200,000Income from operations$230,400$150,000Other income 65,00050,000Income before income tax $295,400$200,000Income tax expense65,00050,000Net income $230,400$150,000Instructions 1. Prepare a comparitive income statement with horizontal analysis for the two-year period , using 20Y1 as the base year.(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).

Horizontal Analysis of Income statement shows increase or decrease in values as compared to last…

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Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter16: Financial Statement Analysis

Section: Chapter Questions

Problem 1PB

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Horizontal analysis of income statement

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

McDade Company

Comparative Income Statement

For the Years Ended December 31, 20Y2 and 20Y1

	20Y2	20Y1
Sales	$910, 000	$700,000
Cost of goods sold	441,000	350,000
Gross Profit	$469,000	350,000
Selling expenses	$139,150	$115,000
Administrative expenses	99,450	85,000
Total operating expenses	$238,600	$200,000
Income from operations	$230,400	$150,000
Other income	65,000	50,000
Income before income tax	$295,400	$200,000
Income tax expense	65,000	50,000
Net income	$230,400	$150,000

Instructions

1. Prepare a comparitive income statement with horizontal analysis for the two-year period , using 20Y1 as the base year.

(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).

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