17-1A Horizontal analysis of income - 20Y2, McDade Company reported Burrows, the president, is presented w tement: McC Comparati For the Years Ended

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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PR 17-1A Horizontal analysis of income statement
OBJ. 2
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
20Υ2
20Υ1
Sales..
$16,800,000 $15,000,000
Cost of merchandise sold...
11,500,000
$ 5,300,000
$ 1,770,000
10,000,000
$ 5,000,000
$ 1,500,000
Gross profit.
Selling expenses..
Administrative expenses
Total operating expenses...
1,220,000
1,000,000
$ 2,990,000 $ 2,500,000
$ 2,500,000
225,000
$ 2,725,000
1,500,000
$ 1,153,950 S 1,225,000
Income from operations..
$ 2,310,000
256,950
Other revenue...
Income before income tax expense.
$ 2,566,950
Income tax expense....
1,413,000
Net income....
Instructions
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.
2.
To the extent the data permit, comment on the significant relationships
revealed by the horizontal analysis prepared in (1).
Transcribed Image Text:PR 17-1A Horizontal analysis of income statement OBJ. 2 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 20Υ2 20Υ1 Sales.. $16,800,000 $15,000,000 Cost of merchandise sold... 11,500,000 $ 5,300,000 $ 1,770,000 10,000,000 $ 5,000,000 $ 1,500,000 Gross profit. Selling expenses.. Administrative expenses Total operating expenses... 1,220,000 1,000,000 $ 2,990,000 $ 2,500,000 $ 2,500,000 225,000 $ 2,725,000 1,500,000 $ 1,153,950 S 1,225,000 Income from operations.. $ 2,310,000 256,950 Other revenue... Income before income tax expense. $ 2,566,950 Income tax expense.... 1,413,000 Net income.... Instructions 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. 2. To the extent the data permit, comment on the significant relationships revealed by the horizontal analysis prepared in (1).
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