Horizontal analysis of income statementFor 2012, McDade Company reported a decline in net income. At the endof the year, T. Burrows, the president, is presented with the followingcondensed comparative income Statement: Instructions1. Prepare a comparative income statement with horizontal analysis forthe two-year period, using 20Y1 as the base year. Round percentages toone decimal place.2. To the extent the data permit, comment on the significant relationshipsrevealed by the horizontal analysis prepared in (1). McDade CompanyComparative Income StatementFor the Years Ended December 31, 20Y2 and 20Y120Υ220Y1Sales....$16,800,000 $15,000,000Cost of goods sold.. .11,500,000 10,000,000Gross profit... .$ 5,300,000 $ 5,000,000Selling expenses....$ 1,770,000 $1,500,000Administrative expenses..... 1,220,000$ 1,000,000Total operating expenses...$ 2,990,000 $ 2,500,000Income from operations... $ 2,310,000 |$ 2,500,000Other revenue.. .256,950225,000Income before income tax..... | $ 2,566,950 $ 2,725,000Income tax expense.. ..1,413,0001,500,000Net income...$ 1,153,950 $ 1,225,0000.....

HORIZONTAL ANALYSIS - IT REFERS TO THE MEASUREMENT OF PERCENTAGE CHANGE IN COMPARATIVE FINANCIAL…

Answered: For 2012, McDade Company reported a…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Horizontal analysis of income statement
For 2012, 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:

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).

McDade Company
Comparative Income Statement
For the Years Ended December 31, 20Y2 and 20Y1
20Υ2
20Y1
Sales....
$16,800,000 $15,000,000
Cost of goods sold.. .
11,500,000 10,000,000
Gross profit... .
$ 5,300,000 $ 5,000,000
Selling expenses....
$ 1,770,000 $1,500,000
Administrative expenses..... 1,220,000
$ 1,000,000
Total operating expenses...$ 2,990,000 $ 2,500,000
Income from operations... $ 2,310,000 |$ 2,500,000
Other revenue.. .
256,950
225,000
Income before income tax..... | $ 2,566,950 $ 2,725,000
Income tax expense.. ..
1,413,000
1,500,000
Net income...
$ 1,153,950 $ 1,225,0000
.....

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