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 $816,816   $741,000 Cost of merchandise sold 573,400   470,000 Gross profit $243,416   $271,000 Selling expenses $79,050   $62,000 Administrative expenses 46,720   39,000 Total operating expenses $125,770   $101,000 Income from operations $117,646   $170,000 Other revenue 3,894   3,100 Income before income tax expense $121,540   $173,100 Income tax expense 34,000   51,900 Net income $87,540   $121,200

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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 $816,816   $741,000
Cost of merchandise sold 573,400   470,000
Gross profit $243,416   $271,000
Selling expenses $79,050   $62,000
Administrative expenses 46,720   39,000
Total operating expenses $125,770   $101,000
Income from operations $117,646   $170,000
Other revenue 3,894   3,100
Income before income tax expense $121,540   $173,100
Income tax expense 34,000   51,900
Net income $87,540   $121,200
### McDade Company
#### Comparative Income Statement for the Years Ended December 31, 20Y2 and 20Y1

| Description                     | 20Y2          | 20Y1          | Difference - Amount | Difference - Percent |
|---------------------------------|---------------|---------------|---------------------|----------------------|
| **Sales**                       | $816,816      | $741,000      |                     |                      |
| **Cost of Merchandise Sold**    | 573,400       | 470,000       |                     |                      |
| **Gross Profit**                | 243,416       | 271,000       |                     |                      |
| **Selling Expenses**            | 79,050        | 62,000        |                     |                      |
| **Administrative Expenses**     | 46,720        | 39,000        |                     |                      |
| **Total Operating Expenses**    | 125,770       | 101,000       |                     |                      |
| **Income from Operations**      | 117,646       | 170,000       |                     |                      |
| **Other Revenue**               | 3,894         | 3,100         |                     |                      |
| **Income Before Income Tax Exp.** | 121,540     | 173,100       |                     |                      |
| **Income Tax Expense**          | 34,000        | 51,900        |                     |                      |
| **Net Income**                  | 87,540        | 121,200       |                     |                      |

1. **Instructions for Analysis:**
   - 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.
   - Use the minus sign to indicate a decrease in the "Difference" columns.

2. **Analysis Conclusion:**

   - Net income has [blank] from 20Y1 to 20Y2.
   - Sales have [blank], however, the cost of merchandise sold has [blank], causing the gross profit to [blank]. 

This table provides a detailed financial comparison of McDade Company's performance over two years, highlighting the differences in sales, expenses, and income to aid in strategic decision-making.
Transcribed Image Text:### McDade Company #### Comparative Income Statement for the Years Ended December 31, 20Y2 and 20Y1 | Description | 20Y2 | 20Y1 | Difference - Amount | Difference - Percent | |---------------------------------|---------------|---------------|---------------------|----------------------| | **Sales** | $816,816 | $741,000 | | | | **Cost of Merchandise Sold** | 573,400 | 470,000 | | | | **Gross Profit** | 243,416 | 271,000 | | | | **Selling Expenses** | 79,050 | 62,000 | | | | **Administrative Expenses** | 46,720 | 39,000 | | | | **Total Operating Expenses** | 125,770 | 101,000 | | | | **Income from Operations** | 117,646 | 170,000 | | | | **Other Revenue** | 3,894 | 3,100 | | | | **Income Before Income Tax Exp.** | 121,540 | 173,100 | | | | **Income Tax Expense** | 34,000 | 51,900 | | | | **Net Income** | 87,540 | 121,200 | | | 1. **Instructions for Analysis:** - 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. - Use the minus sign to indicate a decrease in the "Difference" columns. 2. **Analysis Conclusion:** - Net income has [blank] from 20Y1 to 20Y2. - Sales have [blank], however, the cost of merchandise sold has [blank], causing the gross profit to [blank]. This table provides a detailed financial comparison of McDade Company's performance over two years, highlighting the differences in sales, expenses, and income to aid in strategic decision-making.
Expert Solution
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Answer:

1.

  20Y2   20Y1 Difference amount  Diffe % 
Sales $816,816   $741,000 $75,816 10%
Cost of merchandise sold 573,400   470,000 $103,400 22%
Gross profit $243,416   $271,000 ($27,584) -10%
Selling expenses $79,050   $62,000 $17,050 28%
Administrative expenses 46,720   39,000 $7,720 20%
Total operating expenses $125,770   $101,000 $24,770 25%
Income from operations $117,646   $170,000 ($52,354) -31%
Other revenue 3,894   3,100 $794 26%
Income before income tax expense $121,540   $173,100 ($51,560) -30%
Income tax expense 34,000   51,900 ($17,900) -34%
Net income $87,540   $121,200 ($33,660) -28%
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