Obj. 2 PR 14-1A 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: Sales ....... Cost of goods sold.. Gross profit..... Selling expenses. McDade Company Comparative Income Statement For the Years Ended December 31, 20Y2 and 20Y1 Administrative expenses. Total operating expenses. Operating income... Other revenue Income before income tax expense Income tax expense. Net income.... 20Y2 $ 16,800,000 (11,500,000) $ 5,300,000 20Y1 $ 15,000,000 (10,000,000) $ 5,000,000 $ (1,770,000) $ (1,500,000) (1,220,000) (1,000,000) $ (2,990,000) $ (2,500,000) $ 2,310,000 $ 2,500,000 256,950 225,000 $ 2,566,950 $ 2,725,000 (1,413,000) (1,500,000) $ 1,153,950 $ 1,225,000 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).

Obj. 2 PR 14-1A 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: Sales ....... Cost of goods sold.. Gross profit..... Selling expenses. McDade Company Comparative Income Statement For the Years Ended December 31, 20Y2 and 20Y1 Administrative expenses. Total operating expenses. Operating income... Other revenue Income before income tax expense Income tax expense. Net income.... 20Y2 $ 16,800,000 (11,500,000) $ 5,300,000 20Y1 $ 15,000,000 (10,000,000) $ 5,000,000 $ (1,770,000) $ (1,500,000) (1,220,000) (1,000,000) $ (2,990,000) $ (2,500,000) $ 2,310,000 $ 2,500,000 256,950 225,000 $ 2,566,950 $ 2,725,000 (1,413,000) (1,500,000) $ 1,153,950 $ 1,225,000 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).

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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