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Horizontal Analysis of Income Statement

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

   Gerhardt Inc. Comparative Income Statement For the Years Ended December 31, 20Y2 and 20Y1
   	20Y2		20Y1
   Sales	$805,200		$610,000
   Cost of merchandise sold	365,400		280,000
   Gross profit	$439,800		$330,000
   Selling expenses	$117,200		$92,000
   Administrative expenses	87,400		68,000
   Total operating expenses	$204,600		$160,000
   Income from operations	$235,200		$170,000
   Other revenue	43,700		40,000
   Income before income tax expense	$278,900		$210,000
   Income tax expense	69,700		51,500
   Net income	$209,200		$158,500

   Required:

   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. Use the minus sign to indicate a decrease in the "Difference" columns.

Gerhardt Inc. Comparative Income Statement For the Years Ended December 31, 20Y2 and 20Y1 Difference Difference - Amount - Percent 20Y2 20Y1 Sales % $805,200 $610,000 $ 365,400 280,000 Cost of merchandise sold % Gross profit $439,800 $330,000 % Selling expenses $117,200 $92,000 $ % Administrative expenses 87,400 68,000 % Total operating expenses $204,600 $160,000 $ % Income from operations % $235,200 $170,000 43,700 40,000 Other revenue % % Income before income tax expense $278,900 $210,000 $ Income tax expense 69,700 51,500 Net income $209,200 $158,500 % % 2. Net income has from 20Y1 to 20Y2. Sales have ; however, cost of at a rate, merchandise sold, selling, and administrative expenses have causing

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